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Should Invesco Bloomberg Pricing Power ETF (POWA) Be on Your Investing Radar?

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Designed to provide broad exposure to the Large Cap Growth segment of the US equity market, the Invesco Bloomberg Pricing Power ETF (POWA - Free Report) is a passively managed exchange traded fund launched on 12/15/2006.

The fund is sponsored by Invesco. It has amassed assets over $200.80 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Also, growth stocks are a type of equity that carries more risk compared to others. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

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.

Annual operating expenses for this ETF are 0.40%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.41%.

Sector Exposure and Top Holdings

ETFs offer a 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 to the Industrials sector--about 29.50% of the portfolio. Healthcare and Information Technology round out the top three.

Looking at individual holdings, Iron Mountain Inc (IRM - Free Report) accounts for about 2.60% of total assets, followed by Lockheed Martin Corp (LMT - Free Report) and Best Buy Co Inc (BBY - Free Report) .

The top 10 holdings account for about 22.4% of total assets under management.

Performance and Risk

POWA seeks to match the performance of the BLOOMBERG PRICING POWER INDEX before fees and expenses. The Bloomberg Pricing Power Index composes of U.S. large and mid-capitalization companies that are well-positioned to maintain stable profit margins in all market conditions while focusing on companies that have the smallest deviations among their annual gross profit margins over the last five years.

The ETF has added about 13.25% so far this year and is up about 0% in the last one year (as of 08/22/2024). In the past 52-week period, it has traded between $63.22 and $81.96.

The ETF has a beta of 0.86. With about 50 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Bloomberg Pricing Power 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, POWA is an excellent option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard Growth ETF (VUG - Free Report) and the Invesco QQQ (QQQ - Free Report) track a similar index. While Vanguard Growth ETF has $136.40 billion in assets, Invesco QQQ has $289.91 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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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