July 2020 saw the launch of the Siren Large Cap Blend ETF (NASDAQ:SPQQ), and what a time it was to launch a fund that represented 45.66% of the S&P 500 and 71.89% of the NASDAQ 100 , launching smack dab in the middle of Earnings season!!!!!
We saw gains in 41 of the underlying constituents and monthly drops in only 9 of the holdings
Tesla Inc (NADSAQ:TSLA) (1.66% weighting) was the largest percentage gainer for the fund with a whopping 32.5% move to the upside. It was an impressive report for the company, especially in light of the Fremont plant shutdown for half the quarter. More important than the past quarter is the fact that TSLA now has shown four consecutive profitable quarters, so it is eligible for inclusion in the S&P 500. Some light math shows that if TSLA were included in the S&P 500 index, it would be in the top 30 holdings at an approximate weighting of .8%, making TSLA an Index buy for funds tracking the S&P 500 to the tune of about $29 Billion or 18 Million shares (assuming a price of $1600 a share). The relevance of that potential move to SPQQ is that since TSLA would then be in the top 30 of both the S&P 500 and NASDAQ 100, it would be double weighted in our index and go from a base weighting of 1.67% to a base weighting if 3.33%, and the stock movement would no longer be a pure NASDAQ 100 play but also be subjected to the market movement impact of the S&P 500, and with a float of only 150MM shares, the impact of index buying and selling should not be under estimated!!
Intuitive Surgical (NASDAQ:ISRG) (1.66% weighting) was the second largest percentage gainer in July with a 20.29% move higher. The ISRG was two fold and gave us more optimism for the near future. While their actual GAAP reported income was .57 per diluted share, their non-GAAP net income doubled Bloomberg consensus estimates at $1.11 per diluted share. While the slowdown from Covid-19 impacted their bottom line, the effects were staggered throughout various global regions at separate points in time. ISRG also got a boost when fellow SPQQ constituent Johnson & Johnson (NYSE:JNJ) announced delays to its own robotic surgery program, and not seeing human trials until mid-2022, giving ISRG at least two more years before they expect to see increased competition in the space.
Pfizer Inc (NYSE:PFE) (1.66% weighting)was up 17.68% for the month, but it was on the back of mixed messages throughout July. The company announced a modest beat on earnings, but the stock was hit hard in June falling over 14% on the back of a failed clinical trial for its breast cancer drug Ibrance, so a snap back month wasn’t out of the ordinary, especially coupled with its July announcement of a Coronavirus supply deal, strong results from their gene therapy study on Hemophilia A and their march towards wrapping up its merger with Mylan’s (NYSE:MYL) generic and off patent drug unit Upjohn.
Apple Inc (NASDAQ:AAPL)(3.33% weighting) rose 16.51% in July with most of the fain coming in the last week of the month on the back of a really nice earnings report. Net sales were up year over year by 12% to $59.7 Billion, and net income also climbing 12% to $11.3 billion, all despite the Covid shutdowns. The services division continues to grow making up 22% of total net sales for the quarter, and a growth in gross profit margin for that division from 64.1% to 67.2%. The dividend also increased from 77 cents to 82 cents, but the biggest news was the 4-for-1 stock split to occur in August 2020. The two trading days following the earnings and split announcement saw the stock up almost 14%, but that’s for next months report!!!
We also saw double digit gains from Qualcomm (NASDAQ:QCOM)(1.66% weighting), Amazon.com (NASDAQ:AMZN)(3.33% weighting), Charter Communications (NASDAQ:CHTR)(1.66% weighting), Paypal (NASDAQ:PYPL)(1.66% weighting), Nvidia (NASDAQ:NVDA)(1.66% weighting) and Facebook (NYSE:FB)(3.33% weighting)
The biggest loser for July was Intel Corp (NASDAQ:INTC)(3.33% weighting) dropping an enormous 20.22% , and it was moderately up until the close on July 23rd when they announced earnings. While they beat EPS and revenue estimates, their guidance was awful. Management announced that their 7-nanometer chips would be delayed and be at least a full year behind schedule. The competition from Advanced Micro (NASDAQ:AMD)(not in portfolio), has already been hard on INTC as they have lagged in 10-nanometer chips and investors sold the stock heavily worried that the company could lose its industry leading market share and profits. The CEO even said they may begin using an outside foundry for some of its manufacturing. Being in both the S&P 500 and NASDAQ 100, INTC is a double weight in SPQQ and the big hit in INTC definitely impacted the monthly returns for SPQQ.
August has begun on the tailwinds of the big tech announcements from after the market closed on July 30, and we look forward to the monthly numbers. We took a lot of time before launch testing out different combinations of the S&P 500 and NASDAQ 100 before we settled on the top 30 names from each. It is our tested opinion that that was the optimal blended strategy for our Index. We will continue to issue monthly recaps and hope to have bi-weekly SPQQ news coming to you in August.
Holdings are subject to change on a quarterly basis. The mention of any security should not be construed as a recommendation to buy or sell a security.