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Is Invesco Leisure and Entertainment ETF (PEJ) a Strong ETF Right Now?

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A smart beta exchange traded fund, the Invesco Leisure and Entertainment ETF (PEJ - Free Report) debuted on 06/23/2005, and offers broad exposure to the Consumer Discretionary ETFs 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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

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 $312.47 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. Before fees and expenses, PEJ seeks to match the performance of the Dynamic Leisure & Entertainment Intellidex Index.

The Dynamic Leisure & Entertainment Intellidex Index is comprised of stocks of U.S. leisure and entertainment companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for PEJ are 0.57%, which makes it on par with most peer products in the space.

PEJ's 12-month trailing dividend yield is 0.13%.

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 PEJ, it has heaviest allocation in the Consumer Discretionary sector --about 61.70% of the portfolio --while Telecom and Industrials round out the top three.

When you look at individual holdings, Doordash Inc (DASH - Free Report) accounts for about 5.61% of the fund's total assets, followed by Liberty Media Corp-Liberty Formula One (FWONK - Free Report) and Warner Bros Discovery Inc (WBD - Free Report) .

PEJ's top 10 holdings account for about 48.5% of its total assets under management.

Performance and Risk

So far this year, PEJ has lost about -6.66%, and was up about 5.59% in the last one year (as of 03/31/2025). During this past 52-week period, the fund has traded between $42.41 and $57.72.

PEJ has a beta of 1.34 and standard deviation of 21.65% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Leisure and Entertainment ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Global X Video Games & Esports ETF (HERO - Free Report) tracks SOLACTIVE VIDEO GAMES & ESPORTS INDEX and the VanEck Video Gaming and eSports ETF (ESPO - Free Report) tracks MVIS GLOBAL VIDEO GAMING AND ESPORTS IND. Global X Video Games & Esports ETF has $102.90 million in assets, VanEck Video Gaming and eSports ETF has $303.01 million. HERO has an expense ratio of 0.50% and ESPO charges 0.56%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary 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.

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