Looking for broad exposure to the Small Cap Blend segment of the US equity market? You should consider the Invesco S&P SmallCap Quality ETF (XSHQ), a passively managed exchange traded fund launched on 04/06/2017.
The fund is sponsored by Invesco. It has amassed assets over $437.65 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.29%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.15%.
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.
This ETF has heaviest allocation to the Industrials sector--about 24.40% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Armstrong World Industries Inc (AWI) accounts for about 2.35% of total assets, followed by Robert Half Inc (RHI) and Kontoor Brands Inc (KTB).
The top 10 holdings account for about 19.59% of total assets under management.
Performance and Risk
XSHQ seeks to match the performance of the SmallCap 600 Quality Index before fees and expenses. The S&P SmallCap 600 Quality Index is composed of 120 securities in the S&P SmallCap 600 Index that have the highest quality score, which is calculated based on the average of three fundamental measures: return on equity, accruals ratio and financial leverage ratio.
The ETF has added roughly 2.31% so far this year and it's up approximately 11.19% in the last one year (as of 01/28/2025). In the past 52-week period, it has traded between $38.22 and $47.59.
The ETF has a beta of 1 and standard deviation of 21.54% for the trailing three-year period. With about 122 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P SmallCap Quality ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XSHQ is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $73.21 billion in assets, iShares Core S&P Small-Cap ETF has $89.83 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
Bottom-Line
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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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Get it free >>Invesco S&P SmallCap Quality ETF (XSHQ): ETF Research Reports
Robert Half Inc. (RHI) : Free Stock Analysis Report
Armstrong World Industries, Inc. (AWI) : Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
Kontoor Brands, Inc. (KTB) : 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.
