We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?
Read MoreHide Full Article
A smart beta exchange traded fund, the Invesco Fundamental High Yield Corporate Bond ETF (PHB - Free Report) debuted on 11/15/2007, and offers broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $765.17 million, which makes it one of the larger ETFs in the High-Yield/Junk Bond ETFs. This particular fund, before fees and expenses, seeks to match the performance of the RAFI Bonds US High Yield 1-10 Index.
The RAFI Bonds US High Yield 1-10 Index is comprised of US dollar-denominated bonds that are registered with the SEC or that are Rule 144A securities that provide for registration rights and whose issuers are public companies listed on a major US stock exchange.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.
PHB's 12-month trailing dividend yield is 3.42%.
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.
Looking at individual holdings, Centene Corp-4.62%-12-15-2029 accounts for about 2.07% of total assets, followed by United Airlines Holdings Inc-4.88%-1-15-2025 and Ford Motor Credit Co Llc-3.38%-11-13-2025.
Its top 10 holdings account for approximately 15.99% of PHB's total assets under management.
Performance and Risk
Year-to-date, the Invesco Fundamental High Yield Corporate Bond ETF has gained about 2.86% so far, and is down about -4.55% over the last 12 months (as of 01/23/2023). PHB has traded between $16.37 and $19 in this past 52-week period.
The ETF has a beta of 0.41 and standard deviation of 10.54% for the trailing three-year period, making it a high risk choice in the space. With about 162 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Fundamental High Yield Corporate Bond ETF is not a suitable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx High Yield Corporate Bond ETF (HYG - Free Report) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $10.04 billion in assets, iShares iBoxx High Yield Corporate Bond ETF has $18.71 billion. USHY has an expense ratio of 0.15% and HYG charges 0.48%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the High-Yield/Junk Bond ETFs.
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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Is Invesco Fundamental High Yield Corporate Bond ETF (PHB) a Strong ETF Right Now?
A smart beta exchange traded fund, the Invesco Fundamental High Yield Corporate Bond ETF (PHB - Free Report) debuted on 11/15/2007, and offers broad exposure to the High-Yield/Junk Bond ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $765.17 million, which makes it one of the larger ETFs in the High-Yield/Junk Bond ETFs. This particular fund, before fees and expenses, seeks to match the performance of the RAFI Bonds US High Yield 1-10 Index.
The RAFI Bonds US High Yield 1-10 Index is comprised of US dollar-denominated bonds that are registered with the SEC or that are Rule 144A securities that provide for registration rights and whose issuers are public companies listed on a major US stock exchange.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.50%.
PHB's 12-month trailing dividend yield is 3.42%.
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.
Looking at individual holdings, Centene Corp-4.62%-12-15-2029 accounts for about 2.07% of total assets, followed by United Airlines Holdings Inc-4.88%-1-15-2025 and Ford Motor Credit Co Llc-3.38%-11-13-2025.
Its top 10 holdings account for approximately 15.99% of PHB's total assets under management.
Performance and Risk
Year-to-date, the Invesco Fundamental High Yield Corporate Bond ETF has gained about 2.86% so far, and is down about -4.55% over the last 12 months (as of 01/23/2023). PHB has traded between $16.37 and $19 in this past 52-week period.
The ETF has a beta of 0.41 and standard deviation of 10.54% for the trailing three-year period, making it a high risk choice in the space. With about 162 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco Fundamental High Yield Corporate Bond ETF is not a suitable option for investors seeking to outperform the High-Yield/Junk Bond ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Broad USD High Yield Corporate Bond ETF (USHY - Free Report) tracks BofA Merrill Lynch U.S. High Yield Constrained Index and the iShares iBoxx High Yield Corporate Bond ETF (HYG - Free Report) tracks Markit iBoxx USD Liquid High Yield Index. IShares Broad USD High Yield Corporate Bond ETF has $10.04 billion in assets, iShares iBoxx High Yield Corporate Bond ETF has $18.71 billion. USHY has an expense ratio of 0.15% and HYG charges 0.48%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the High-Yield/Junk Bond ETFs.
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.