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Is Invesco S&P SmallCap Quality ETF (XSHQ) a Strong ETF Right Now?
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The Invesco S&P SmallCap Quality ETF (XSHQ - Free Report) was launched on 04/06/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend 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.
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.
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.
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.
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 $305.57 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. XSHQ, before fees and expenses, seeks to match the performance of the SmallCap 600 Quality Index.
The S&P SmallCap 600 Quality Index is composed of 120 securities in the S&P SmallCap 600 Index that have the highest quality score, which is calculated based on the average of 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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.29%.
It's 12-month trailing dividend yield comes in at 1.01%.
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.
This ETF has heaviest allocation in the Financials sector - about 20.40% of the portfolio. Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, Mueller Industries Inc (MLI - Free Report) accounts for about 2.71% of the fund's total assets, followed by Badger Meter Inc (BMI - Free Report) and Sm Energy Co (SM - Free Report) .
The top 10 holdings account for about 21.12% of total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P SmallCap Quality ETF has added about 9.23% so far, and was up about 15.88% over the last 12 months (as of 07/29/2024). XSHQ has traded between $33.63 and $43.34 in this past 52-week period.
XSHQ has a beta of 0.97 and standard deviation of 21.19% for the trailing three-year period. With about 118 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P SmallCap Quality ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 ETF (IWM - Free Report) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $72.49 billion in assets, iShares Core S&P Small-Cap ETF has $85.96 billion. IWM has an expense ratio of 0.19% and IJR 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 - Small 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 SmallCap Quality ETF (XSHQ) a Strong ETF Right Now?
The Invesco S&P SmallCap Quality ETF (XSHQ - Free Report) was launched on 04/06/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend 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.
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.
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.
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.
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 $305.57 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. XSHQ, before fees and expenses, seeks to match the performance of the SmallCap 600 Quality Index.
The S&P SmallCap 600 Quality Index is composed of 120 securities in the S&P SmallCap 600 Index that have the highest quality score, which is calculated based on the average of 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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.29%.
It's 12-month trailing dividend yield comes in at 1.01%.
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.
This ETF has heaviest allocation in the Financials sector - about 20.40% of the portfolio. Industrials and Consumer Discretionary round out the top three.
When you look at individual holdings, Mueller Industries Inc (MLI - Free Report) accounts for about 2.71% of the fund's total assets, followed by Badger Meter Inc (BMI - Free Report) and Sm Energy Co (SM - Free Report) .
The top 10 holdings account for about 21.12% of total assets under management.
Performance and Risk
Year-to-date, the Invesco S&P SmallCap Quality ETF has added about 9.23% so far, and was up about 15.88% over the last 12 months (as of 07/29/2024). XSHQ has traded between $33.63 and $43.34 in this past 52-week period.
XSHQ has a beta of 0.97 and standard deviation of 21.19% for the trailing three-year period. With about 118 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P SmallCap Quality ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 ETF (IWM - Free Report) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $72.49 billion in assets, iShares Core S&P Small-Cap ETF has $85.96 billion. IWM has an expense ratio of 0.19% and IJR 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 - Small 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.