Looking for broad exposure to the Large Cap Growth segment of the US equity market? You should consider the Invesco Defensive Equity ETF (DEF), a passively managed exchange traded fund launched on 12/15/2006.
The fund is sponsored by Invesco. It has amassed assets over $271.25 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 typically 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. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.55%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.23%.
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.
This ETF has heaviest allocation to the Information Technology sector--about 27.20% of the portfolio. Healthcare and Industrials round out the top three.
Looking at individual holdings, Ebay Inc (EBAY) accounts for about 1.25% of total assets, followed by Tractor Supply Co (TSCO) and Synopsys Inc (SNPS).
The top 10 holdings account for about 11.54% of total assets under management.
Performance and Risk
DEF seeks to match the performance of the Guggenheim Defensive Equity Index before fees and expenses. The Guggenheim Defensive Equity Index is comprised of approximately 100 stocks selected from the S&P 500 Index based on investment and other screening criteria. The companies selected have potentially superior risk-return profiles during periods of stock market weakness while still offering the potential for gains during periods of market strength.
The ETF has lost about -5.47% so far this year and is down about -0.64% in the last one year (as of 07/13/2020). In the past 52-week period, it has traded between $37.36 and $58.86.
The ETF has a beta of 0.85 and standard deviation of 21.28% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Invesco Defensive Equity 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, DEF is an outstanding 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) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $58.05 billion in assets, Invesco QQQ has $125.76 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
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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Invesco Defensive Equity ETF (DEF): ETF Research Reports
eBay Inc. (EBAY) : Free Stock Analysis Report
Tractor Supply Company (TSCO) : Free Stock Analysis Report
Synopsys, Inc. (SNPS) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
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