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Is Invesco S&P 500 Quality ETF (SPHQ) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco S&P 500 Quality ETF (SPHQ - Free Report) debuted on 12/06/2005, and offers broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $8.22 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. SPHQ seeks to match the performance of the S&P 500 Quality Index before fees and expenses.
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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.15% for SPHQ, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.32%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For SPHQ, it has heaviest allocation in the Information Technology sector --about 34.40% of the portfolio --while Healthcare and Industrials round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO - Free Report) accounts for about 5.64% of the fund's total assets, followed by Nvidia Corp (NVDA - Free Report) and Alphabet Inc (GOOG - Free Report) .
Its top 10 holdings account for approximately 44.69% of SPHQ's total assets under management.
Performance and Risk
So far this year, SPHQ has added roughly 8.08%, and was up about 31.08% in the last one year (as of 03/01/2024). During this past 52-week period, the fund has traded between $44.57 and $58.50.
The fund has a beta of 0.93 and standard deviation of 17.28% for the trailing three-year period, which makes SPHQ a medium risk choice in this particular space. With about 102 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 $26.21 billion in assets, Vanguard Dividend Appreciation ETF has $76.50 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?
A smart beta exchange traded fund, the Invesco S&P 500 Quality ETF (SPHQ - Free Report) debuted on 12/06/2005, and offers broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $8.22 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. SPHQ seeks to match the performance of the S&P 500 Quality Index before fees and expenses.
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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.15% for SPHQ, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.32%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For SPHQ, it has heaviest allocation in the Information Technology sector --about 34.40% of the portfolio --while Healthcare and Industrials round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO - Free Report) accounts for about 5.64% of the fund's total assets, followed by Nvidia Corp (NVDA - Free Report) and Alphabet Inc (GOOG - Free Report) .
Its top 10 holdings account for approximately 44.69% of SPHQ's total assets under management.
Performance and Risk
So far this year, SPHQ has added roughly 8.08%, and was up about 31.08% in the last one year (as of 03/01/2024). During this past 52-week period, the fund has traded between $44.57 and $58.50.
The fund has a beta of 0.93 and standard deviation of 17.28% for the trailing three-year period, which makes SPHQ a medium risk choice in this particular space. With about 102 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 $26.21 billion in assets, Vanguard Dividend Appreciation ETF has $76.50 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.