Looking for broad exposure to the Large Cap Growth segment of the US equity market? You should consider the Invesco Defensive Equity ETF (DEF), a passively managed exchange traded fund launched on 12/15/2006.
The fund is sponsored by Invesco. It has amassed assets over $255.22 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Companies that fall in the large cap category tend to have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Further, growth stocks have a higher level of volatility associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.55%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.35%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 26.30% of the portfolio. Healthcare and Industrials round out the top three.
Looking at individual holdings, Tyler Technologies Inc (TYL) accounts for about 1.18% of total assets, followed by Xilinx Inc (XLNX) and Idexx Laboratories Inc (IDXX).
The top 10 holdings account for about 11.03% of total assets under management.
Performance and Risk
DEF seeks to match the performance of the Guggenheim Defensive Equity Index before fees and expenses. The Guggenheim Defensive Equity Index is comprised of approximately 100 stocks selected from the S&P 500 Index based on investment and other screening criteria. The companies selected have potentially superior risk-return profiles during periods of stock market weakness while still offering the potential for gains during periods of market strength.
The ETF has added roughly 1.20% so far this year and it's up approximately 6.85% in the last one year (as of 01/07/2021). In the past 52-week period, it has traded between $37.36 and $59.65.
The ETF has a beta of 0.86 and standard deviation of 21.95% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Invesco Defensive Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, DEF is a reasonable option for those seeking exposure to the Style Box - Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Growth ETF (VUG) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $66.65 billion in assets, Invesco QQQ has $148.90 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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.