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Is Invesco S&P 500 Quality ETF (SPHQ) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Invesco S&P 500 Quality ETF (SPHQ - Free Report) is a smart beta exchange traded fund launched on 12/06/2005.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco. SPHQ has been able to amass assets over $6.70 billion, making it one of the largest ETFs in the Style Box - Large Cap Blend. SPHQ, before fees and expenses, seeks to match the performance of the S&P 500 Quality Index.
The S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for SPHQ are 0.15%, which makes it one of the cheaper products in the space.
SPHQ's 12-month trailing dividend yield is 1.43%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
SPHQ's heaviest allocation is in the Information Technology sector, which is about 33.20% of the portfolio. Its Healthcare and Energy round out the top three.
Looking at individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 5.79% of total assets, followed by Alphabet Inc (GOOG - Free Report) and Mastercard Inc (MA - Free Report) .
Its top 10 holdings account for approximately 45.42% of SPHQ's total assets under management.
Performance and Risk
The ETF return is roughly 24.46% and is up about 25.40% so far this year and in the past one year (as of 12/25/2023), respectively. SPHQ has traded between $43.41 and $54.22 during this last 52-week period.
The ETF has a beta of 0.92 and standard deviation of 17.46% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P 500 Quality ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core Dividend Growth ETF (DGRO - Free Report) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $25.06 billion in assets, Vanguard Dividend Appreciation ETF has $73.24 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is Invesco S&P 500 Quality ETF (SPHQ) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the Invesco S&P 500 Quality ETF (SPHQ - Free Report) is a smart beta exchange traded fund launched on 12/06/2005.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Invesco. SPHQ has been able to amass assets over $6.70 billion, making it one of the largest ETFs in the Style Box - Large Cap Blend. SPHQ, before fees and expenses, seeks to match the performance of the S&P 500 Quality Index.
The S&P 500 Quality Index tracks the performance of stocks in the S&P 500 Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for SPHQ are 0.15%, which makes it one of the cheaper products in the space.
SPHQ's 12-month trailing dividend yield is 1.43%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
SPHQ's heaviest allocation is in the Information Technology sector, which is about 33.20% of the portfolio. Its Healthcare and Energy round out the top three.
Looking at individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 5.79% of total assets, followed by Alphabet Inc (GOOG - Free Report) and Mastercard Inc (MA - Free Report) .
Its top 10 holdings account for approximately 45.42% of SPHQ's total assets under management.
Performance and Risk
The ETF return is roughly 24.46% and is up about 25.40% so far this year and in the past one year (as of 12/25/2023), respectively. SPHQ has traded between $43.41 and $54.22 during this last 52-week period.
The ETF has a beta of 0.92 and standard deviation of 17.46% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P 500 Quality ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core Dividend Growth ETF (DGRO - Free Report) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG - Free Report) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $25.06 billion in assets, Vanguard Dividend Appreciation ETF has $73.24 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.