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Should Invesco S&P MidCap Momentum ETF (XMMO) Be on Your Investing Radar?

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The Invesco S&P MidCap Momentum ETF (XMMO - Free Report) was launched on 03/03/2005, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Growth segment of the US equity market.

The fund is sponsored by Invesco. It has amassed assets over $2.43 billion, making it one of the larger ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Further, growth stocks have a higher level of volatility associated with them. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.34%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.33%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 41.40% of the portfolio. Consumer Discretionary and Information Technology round out the top three.

Looking at individual holdings, Manhattan Associates Inc (MANH - Free Report) accounts for about 3.55% of total assets, followed by Lennox International Inc (LII - Free Report) and Emcor Group Inc (EME - Free Report) .

The top 10 holdings account for about 26.29% of total assets under management.

Performance and Risk

XMMO seeks to match the performance of the S&P MIDCAP 400 MOMENTUM INDEX before fees and expenses. The S&P Midcap 400 Momentum Index is composed of securities with strong growth characteristics selected from the Russell Midcap Index.

The ETF return is roughly 33.48% so far this year and it's up approximately 52.95% in the last one year (as of 10/04/2024). In the past 52-week period, it has traded between $74.81 and $120.89.

The ETF has a beta of 0.99 and standard deviation of 21.55% for the trailing three-year period. With about 77 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap Momentum ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XMMO is a good option for those seeking exposure to the Style Box - Mid Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Mid-Cap Growth ETF (VOT - Free Report) and the iShares Russell Mid-Cap Growth ETF (IWP - Free Report) track a similar index. While Vanguard Mid-Cap Growth ETF has $14.05 billion in assets, iShares Russell Mid-Cap Growth ETF has $14.88 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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