Launched on 06/23/2005, the Invesco Leisure and Entertainment ETF (PEJ) is a smart beta exchange traded fund offering 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Invesco, PEJ has amassed assets over $263.47 million, making it one of the larger ETFs in the Consumer Discretionary ETFs. PEJ, before fees and expenses, seeks to match the performance of the Dynamic Leisure & Entertainment Intellidex Index.
The Dynamic Leisure & Entertainment Intellidex 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 0.58% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.39%.
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.
PEJ's heaviest allocation is in the Consumer Discretionary sector, which is about 48.70% of the portfolio. Its Telecom and Consumer Staples round out the top three.
Looking at individual holdings, Booking Holdings Inc (BKNG) accounts for about 5.70% of total assets, followed by Live Nation Entertainment Inc (LYV) and Royal Caribbean Cruises Ltd (RCL).
Its top 10 holdings account for approximately 48.04% of PEJ's total assets under management.
Performance and Risk
So far this year, PEJ has added about 28.34%, and is up about 36.89% in the last one year (as of 11/25/2024). During this past 52-week period, the fund has traded between $38.84 and $53.60.
The fund has a beta of 1.35 and standard deviation of 22.65% for the trailing three-year period, which makes PEJ a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco 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 $105.67 million in assets, VanEck Video Gaming and eSports ETF has $276.71 million. HERO has an expense ratio of 0.50% and ESPO charges 0.56%.
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.
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 Leisure and Entertainment ETF (PEJ): ETF Research Reports
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
Global X Video Games & Esports ETF (HERO): ETF Research Reports
Live Nation Entertainment, Inc. (LYV) : Free Stock Analysis Report
Booking Holdings Inc. (BKNG) : Free Stock Analysis Report
VanEck Video Gaming and eSports ETF (ESPO): ETF Research Reports
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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.
