Is Invesco Dynamic Building & Construction ETF (PKB) a Strong ETF Right Now?
Smart Beta ETF report for PKB
The Invesco Dynamic Building & Construction ETF (PKB) was launched on 10/26/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $270.80 million, making it one of the average sized ETFs in the Industrials ETFs. Before fees and expenses, PKB seeks to match the performance of the Dynamic Building & Construction Intellidex Index.
The index is comprised of stocks of U.S. building and construction 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.59%.
The fund has a 12-month trailing dividend yield of 0.25%.
Sector Exposure and Top Holdings
ETFs offer 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.
Representing 37.30% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Industrials and Materials round out the top three.
Taking into account individual holdings, Johnson Controls International Plc (JCI) accounts for about 5.67% of the fund's total assets, followed by Trane Technologies Plc (TT) and Lowe's Cos Inc (LOW).
PKB's top 10 holdings account for about 47% of its total assets under management.
Performance and Risk
The ETF has gained about 18.71% so far this year and is up roughly 27.25% in the last one year (as of 10/07/2021). In the past 52-week period, it has traded between $35.47 and $54.37.
The ETF has a beta of 1.37 and standard deviation of 34.85% for the trailing three-year period, making it a high risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.
Invesco Dynamic Building & Construction ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
SPDR S&P Homebuilders ETF (XHB) tracks S&P Homebuilders Select Industry Index and the iShares U.S. Home Construction ETF (ITB) tracks Dow Jones U.S. Select Home Construction Index. SPDR S&P Homebuilders ETF has $1.54 billion in assets, iShares U.S. Home Construction ETF has $2.32 billion. XHB has an expense ratio of 0.35% and ITB charges 0.41%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials 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.
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Invesco Dynamic Building & Construction ETF (PKB): ETF Research Reports
Johnson Controls International plc (JCI): Free Stock Analysis Report
Lowes Companies, Inc. (LOW): Free Stock Analysis Report
SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
iShares U.S. Home Construction ETF (ITB): ETF Research Reports
Trane Technologies plc (TT): Free Stock Analysis Report
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