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 $299.42 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. Overall, they are usually a stable option, with less risk and more sure-fire cash flows 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. Additionally, growth stocks have a greater level of risk associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other 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 0.55%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.18%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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 26.70% 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 -1.40% so far this year and was up about 5.28% in the last one year (as of 08/04/2020). 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 21.32% 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.
Alternatives
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 excellent 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 $60.47 billion in assets, Invesco QQQ has $126.27 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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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