If you're interested in broad exposure to the Large Cap Growth segment of the US equity market, look no further than 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 $280.35 M, 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.
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. Also, growth stocks are a type of equity that carries more risk compared to others. 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 0.59%, making it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 1.09%.
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 Financials sector--about 17.20% of the portfolio. Healthcare and Industrials round out the top three.
Looking at individual holdings, Allegion Plc (ALLE) accounts for about 1.17% of total assets, followed by Citrix Systems Inc (CTXS) and Garmin Ltd (GRMN).
The top 10 holdings account for about 11.18% 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 added about 27.34% so far this year and is up about 26.46% in the last one year (as of 12/20/2019). In the past 52-week period, it has traded between $41.71 and $56.16.
The ETF has a beta of 0.75 and standard deviation of 11.12% for the trailing three-year period, making it a medium risk choice in the space. With about 100 holdings, it effectively diversifies company-specific risk.
Invesco Defensive Equity 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, DEF is a reasonable option for those seeking exposure to the Style Box - Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 1000 Growth ETF (IWF) and the Invesco QQQ (QQQ) track a similar index. While iShares Russell 1000 Growth ETF has $49.16 B in assets, Invesco QQQ has $86.83 B. IWF has an expense ratio of 0.19% 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
Citrix Systems, Inc. (CTXS) : Free Stock Analysis Report
Garmin Ltd. (GRMN) : Free Stock Analysis Report
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
Invesco QQQ (QQQ): ETF Research Reports
Allegion PLC (ALLE) : Free Stock Analysis Report
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