Is Invesco Dynamic Leisure and Entertainment ETF (PEJ) a Strong ETF Right Now?
Smart Beta ETF report for PEJ
Making its debut on 06/23/2005, smart beta exchange traded fund Invesco Dynamic Leisure and Entertainment ETF (PEJ) provides investors broad exposure to the Consumer Discretionary ETFs 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
PEJ is managed by Invesco, and this fund has amassed over $1.40 billion, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dynamic Leisure & Entertainment Intellidex Index.
The index is comprised of stocks of U.S. leisure and entertainment companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.63% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.73%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PEJ, it has heaviest allocation in the Consumer Discretionary sector --about 55.90% of the portfolio --while Telecom and Consumer Staples round out the top three.
Taking into account individual holdings, Viacomcbs Inc (VIAC) accounts for about 5.26% of the fund's total assets, followed by Starbucks Corp (SBUX) and Yum China Holdings Inc (YUMC).
PEJ's top 10 holdings account for about 46.64% of its total assets under management.
Performance and Risk
The ETF has added about 31.81% so far this year and it's up approximately 59.28% in the last one year (as of 09/29/2021). In the past 52-week period, it has traded between $30 and $54.78.
The ETF has a beta of 1.41 and standard deviation of 32.93% for the trailing three-year period, making it a high risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.
Invesco Dynamic Leisure and Entertainment ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Global X Video Games & Esports ETF (HERO) tracks SOLACTIVE VIDEO GAMES & ESPORTS INDEX and the VanEck Video Gaming and eSports ETF (ESPO) tracks MVIS GLOBAL VIDEO GAMING AND ESPORTS IND. Global X Video Games & Esports ETF has $506.94 million in assets, VanEck Video Gaming and eSports ETF has $629.17 million. HERO has an expense ratio of 0.50% and ESPO charges 0.55%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.
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.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
Starbucks Corporation (SBUX): Free Stock Analysis Report
Global X Video Games & Esports ETF (HERO): ETF Research Reports
Yum China Holdings Inc. (YUMC): Free Stock Analysis Report
VanEck Video Gaming and eSports ETF (ESPO): ETF Research Reports
ViacomCBS Inc. (VIAC): Free Stock Analysis Report
To read this article on Zacks.com click here.