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Is Invesco S&P 500 Quality ETF (SPHQ) a Strong ETF Right Now?
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The Invesco S&P 500 Quality ETF (SPHQ - Free Report) was launched on 12/06/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $8.60 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. Before fees and expenses, SPHQ 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
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.
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 1.33%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For SPHQ, it has heaviest allocation in the Information Technology sector --about 34.10% of the portfolio --while Healthcare and Industrials round out the top three.
Taking into account individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 8.43% of the fund's total assets, followed by Broadcom Inc (AVGO - Free Report) and Alphabet Inc (GOOG - Free Report) .
Its top 10 holdings account for approximately 47.38% of SPHQ's total assets under management.
Performance and Risk
So far this year, SPHQ has gained about 8.15%, and is up roughly 24.41% in the last one year (as of 05/03/2024). During this past 52-week period, the fund has traded between $46.83 and $60.48.
The fund has a beta of 0.92 and standard deviation of 17.16% for the trailing three-year period, which makes SPHQ a medium risk choice in this particular space. With about 103 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 $26.52 billion in assets, Vanguard Dividend Appreciation ETF has $75.75 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?
The Invesco S&P 500 Quality ETF (SPHQ - Free Report) was launched on 12/06/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Invesco, and has been able to amass over $8.60 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Blend. Before fees and expenses, SPHQ 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
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.
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 1.33%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For SPHQ, it has heaviest allocation in the Information Technology sector --about 34.10% of the portfolio --while Healthcare and Industrials round out the top three.
Taking into account individual holdings, Nvidia Corp (NVDA - Free Report) accounts for about 8.43% of the fund's total assets, followed by Broadcom Inc (AVGO - Free Report) and Alphabet Inc (GOOG - Free Report) .
Its top 10 holdings account for approximately 47.38% of SPHQ's total assets under management.
Performance and Risk
So far this year, SPHQ has gained about 8.15%, and is up roughly 24.41% in the last one year (as of 05/03/2024). During this past 52-week period, the fund has traded between $46.83 and $60.48.
The fund has a beta of 0.92 and standard deviation of 17.16% for the trailing three-year period, which makes SPHQ a medium risk choice in this particular space. With about 103 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 $26.52 billion in assets, Vanguard Dividend Appreciation ETF has $75.75 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.