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The Q.ai Team

About the Tech Rally Kit

About the Tech Rally Kit

It’s no secret that some tech giants have been struggling to keep pace with their pandemic performances—and there’s been quite a lot of talk of a tech selloff.

Tech companies have taken a beating—arguably, unfairly so, especially considering earnings growth expectations remain high.

So you can capitalize on higher growth in technology instead of traditional sectors with the Tech Rally Kit.

Here’s how it works.

Long tech and short traditional companies the Tech Rally Kit

Forward expectations for technology and communications services are higher than for traditional companies in the Dow. But, at the moment, the Dow is more expensive—and that just doesn’t make a whole lot of sense.

That’s why we created this hedged pair trade, which uses a long-short approach to help you benefit from the current gap in valuations for tech stocks and more traditional companies. 

Invest in U.S. equities through ETFs

Investing long and shorting doesn’t involve such simple mechanics for everyday investors, especially when it comes to pair trades. That’s why we use inverse ETFs to offer you the same but simplified benefits of holding short positions.

This Investment Kit is positioned to capitalize on the convergence in the value of the tech sector relative to more traditional businesses.

The long basket is a mix of the Communication Services Select Sector SPDR Fund (XLC) and the Technology Select Sector SPDR Fund (XLK). That fund rebalances weekly for an ideal mix of the two sector ETFs.

To break this down further for you, XLC includes Alphabet, Meta and T-Mobile, as well as many other communications leaders. Meanwhile XLK carries Microsoft, Apple and Visa, as well as other tech stocks.

From there, based on the sensitivity of the long positions to the Dow 30, we add an appropriate amount of SDOW, an inverse ETF against the Dow 30. Again, when the Kit rebalances weekly to find the ideal mix of long investments, the inverse ETF creates a synthetic short of appropriate size against the Dow 30.

Benefit from the gap in tech and traditional company valuations

Through this Kit, you can benefit from Q.ai’s view that tech is relatively undervalued, which we think is especially true when compared to lower-growth companies and industries.

Sure, the overall market could trend down further. But, if we’re right about these climbing earnings expectations, relative valuations should converge. If and when they do, so long as you’re invested in this Kit, you’ll see gains.

Bottom line

Put simply: Technology has been tanking, but we believe it’s majorly undervalued right now. But you don’t have to wait and see what happens in the tech industry before you dip your toes or dive deeper. 

With this Kit, whatever happens, so long as we’re right about the converging gap in valuations between tech and traditional sectors, your portfolio will be positively impacted.

Plus, because the Tech Rally Kit is one of our specialized paired trades, we’re offering it to you as a smaller position. The low investment minimum of the Kit is only $50, making it more affordable and easy to diversify your portfolio.

This kind of Kit would be productized by major hedge funds for high-net-worth investors, but Q.ai makes it easy for everyone.

Add the Tech Rally Kit to your investment portfolio in Q.ai. 

Q.ai is the trade name of Quantalytics Holdings, LLC. Q.ai, LLC is a wholly-owned subsidiary of Quantalytics Holdings, LLC ("Quantalytics"). Quantalytics offers automated financial advice tools through Quantalytics Investment Advisors, LLC ("QAI"), an SEC-registered investment advisor. QIA’s investment advisory services are ONLY available only to residents of the United States. Disclosures concerning QIA’s investment advisory services are available on its Form ADV filed with the SEC. The content in this newsletter is for informational purposes only and does not constitute a comprehensive description of Q.ai's investment advisory services.

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