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Should Invesco S&P MidCap Quality ETF (XMHQ) Be on Your Investing Radar?

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Looking for broad exposure to the Mid Cap Blend segment of the US equity market? You should consider the Invesco S&P MidCap Quality ETF (XMHQ - Free Report) , a passively managed exchange traded fund launched on 12/01/2006.

The fund is sponsored by Invesco. It has amassed assets over $709.78 million, making it one of the average sized ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.52%.

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.

This ETF has heaviest allocation to the Industrials sector--about 27.60% of the portfolio. Consumer Discretionary and Healthcare round out the top three.

Looking at individual holdings, Axon Enterprise Inc (AXON - Free Report) accounts for about 3.19% of total assets, followed by Manhattan Associates Inc (MANH - Free Report) and Williams-Sonoma Inc (WSM - Free Report) .

The top 10 holdings account for about 24.38% of total assets under management.

Performance and Risk

XMHQ seeks to match the performance of the S&P MIDCAP 400 QUALITY INDEX before fees and expenses. The S&P MidCap 400 Quality Index is designed to provide equal-weighted exposure to approximately 800 securities of medium-sized companies in the larger US equity market.

The ETF has added roughly 6.58% so far this year and was up about 4.73% in the last one year (as of 05/03/2023). In the past 52-week period, it has traded between $62.01 and $77.13.

The ETF has a beta of 1.03 and standard deviation of 22.89% for the trailing three-year period. With about 81 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap Quality ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XMHQ is an outstanding option for investors seeking exposure to the Style Box - Mid Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard Mid-Cap ETF (VO - Free Report) and the iShares Core S&P Mid-Cap ETF (IJH - Free Report) track a similar index. While Vanguard Mid-Cap ETF has $50.59 billion in assets, iShares Core S&P Mid-Cap ETF has $65.32 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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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