Designed to provide broad exposure to the Industrials ETFs category of the market, the Invesco Building & Construction ETF (PKB) is a smart beta exchange traded fund launched on 10/26/2005.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Managed by Invesco, PKB has amassed assets over $419.78 million, making it one of the average sized ETFs in the Industrials ETFs. PKB seeks to match the performance of the Dynamic Building & Construction Intellidex Index before fees and expenses.
The Dynamic Building & Construction Intellidex 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.22%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PKB, it has heaviest allocation in the Industrials sector --about 45.90% of the portfolio --while Materials and Consumer Discretionary round out the top three.
Looking at individual holdings, Trane Technologies Plc (TT) accounts for about 5.38% of total assets, followed by Emcor Group Inc (EME) and Lennox International Inc (LII).
The top 10 holdings account for about 47.41% of total assets under management.
Performance and Risk
The ETF return is roughly 2.42% so far this year and is up about 25.12% in the last one year (as of 01/15/2025). In the past 52-week period, it has traded between $60.81 and $88.37.
The fund has a beta of 1.39 and standard deviation of 26.18% for the trailing three-year period, which makes PKB a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco 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. The fund has $1.80 billion in assets. XHB has an expense ratio of 0.35%.
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.
Bottom Line
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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Get it free >>Invesco Building & Construction ETF (PKB): ETF Research Reports
Lennox International, Inc. (LII) : Free Stock Analysis Report
EMCOR Group, Inc. (EME) : Free Stock Analysis Report
SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
Trane Technologies plc (TT) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
