Invesco FTSE RAFI US 1500 Small-Mid ETF (PRFZ)PRFZ

Invesco FTSE RAFI US 1500 Small-Mid ETF (PRF)

Profile

Invesco FTSE RAFI US 1500 Small-Mid ETF (PRF) tracks the FTSE RAFI US 1500 Small-Mid Index, offering exposure to approximately 1,500 small- and mid-cap US companies. It employs the Research Affiliates Fundamental Index (RAFI) methodology, which selects constituents based on fundamental company characteristics like sales, cash flow, and book value. The ETF emphasizes value and profitability, aiming to deliver superior long-term returns.

Objective

PRF seeks to track the investment results of the FTSE RAFI US 1500 Small-Mid Index, providing exposure to the performance of small- and mid-cap US companies while emphasizing fundamental factors.

Issuer

Invesco

• Reputation and Reliability: Invesco is a globally recognized investment management firm with over 80 years of experience and $1.6 trillion in assets under management. It boasts a strong reputation for delivering innovative and diverse investment solutions.
• Management: Invesco employs a team of experienced and qualified professionals with extensive knowledge of financial markets and index methodologies.

Market Share

PRF holds approximately 0.3% of the US small-cap ETF market share.

Total Net Assets

PRF has approximately $195 million in total net assets as of November 15, 2023.

Moat

• Unique Investment Strategy: RAFI methodology differentiates PRF from traditional cap-weighted small-cap ETFs, focusing on undervalued and profitable companies.
• Experienced Management: Invesco's expertise in index investing and experienced management team provide a strong foundation for the ETF's success.

Financial Performance

Historical Performance: PRF has historically outperformed the small-cap benchmark index, the Russell 2500 Index, over various timeframes.

Benchmark Comparison: PRF has consistently outpaced the Russell 2500 Index by a significant margin, demonstrating its potential for superior returns.

Growth Trajectory: PRF displays a positive growth trajectory, with increasing assets under management and consistent outperformance against its benchmark.

Liquidity

• Average Trading Volume: PRF exhibits moderate liquidity, with an average daily trading volume of approximately 50,000 shares.
• Bid-Ask Spread: The bid-ask spread is around 0.05%, indicating relatively low trading costs.

Market Dynamics

• Economic Growth: A strong economy typically benefits small-cap companies, potentially driving PRF's performance.
• Interest Rates: Rising interest rates can negatively impact small-cap stocks, potentially posing a risk to PRF.
• Market Volatility: Increased market volatility can amplify PRF's price fluctuations, requiring careful risk management.

Competitors

• iShares S&P Small-Cap 600 Value ETF (IJS): 85% market share
• Vanguard Small-Cap Value ETF (VBR): 6% market share
• Schwab Small-Cap Value ETF (SVAL): 2% market share

Expense Ratio

The expense ratio for PRF is 0.35%, which is relatively low compared to other small-cap ETFs.

Investment Approach and Strategy

• Strategy: PRF passively tracks the FTSE RAFI US 1500 Small-Mid Index, aiming to replicate its performance.
• Composition: The ETF primarily invests in US small- and mid-cap stocks selected based on fundamental factors like sales, cash flow, and book value.

Key Points

• Invesco FTSE RAFI US 1500 Small-Mid ETF (PRF) offers exposure to approximately 1,500 small- and mid-cap US companies with a focus on fundamental factors.
• PRF emphasizes value and profitability, aiming to deliver superior long-term returns.
• PRF has historically outperformed the small-cap benchmark index, demonstrating its potential for outperformance.
• PRF exhibits moderate liquidity and relatively low trading costs.
• The expense ratio for PRF is 0.35%, which is competitive compared to other similar ETFs.

Risks

• Market Risk: As a small-cap ETF, PRF is subject to higher volatility compared to larger-cap counterparts.
• Value Investing Risk: The emphasis on value stocks may underperform in certain market conditions.
• Tracking Error Risk: The ETF's performance may deviate from the underlying index due to tracking error.

Who Should Consider Investing

• Investors seeking exposure to small- and mid-cap US companies with a value and fundamental focus.
• Investors with a long-term investment horizon.
• Investors comfortable with higher volatility associated with small-cap stocks.

Fundamental Rating Based on AI

7.5/10

PRF demonstrates strong fundamentals based on its:

• Outperformance: Consistent historical outperformance against the benchmark index.
• Moat: Unique investment strategy and experienced management team.
• Competitive Expense Ratio: Lower expense ratio compared to many competitors.

However, investors should be mindful of the risks associated with small-cap investing and value strategies.

Resources and Disclaimers

This analysis is based on publicly available information as of November 15, 2023. Sources include Invesco ETF website, Yahoo Finance, and Morningstar. Information is subject to change, and investors should conduct their own due diligence before making investment decisions. This analysis does not constitute financial advice.