Invesco S&P SmallCap Consumer Staples ETF (PSCC)

ETF Invesco S&P SmallCap Consumer Staples ETF (XST): An Overview

Profile:

XST is an ETF that tracks the S&P SmallCap 600 Consumer Staples Index. It focuses on investing in the stocks of small-cap companies (market capitalization between $300 million and $2 billion) within the consumer staples sector. These companies primarily offer essential goods and services with relatively inelastic demand, such as food, beverages, household products, and personal care items. XST employs a passive management approach, replicating the composition of the underlying index.

Objective:

The ETF aims to achieve long-term capital appreciation by providing investors with exposure to a diversified basket of small-cap consumer staples stocks. It offers an opportunity to participate in the potential growth of this specific market segment while mitigating individual stock risks through diversification.

Issuer:

Invesco is a prominent global asset management company with over 80 years of industry experience and $1.4 trillion in assets under management (as of June 30, 2023). Invesco enjoys a solid reputation with a strong track record in managing various ETFs.

Market Share:

XST is one of the leading ETFs in the small-cap consumer staples space, boasting a market share of approximately 7%. This demonstrates its popularity among investors seeking exposure to this specific market segment.

Total Net Assets:

XST currently has over $4 billion in assets under management, further solidifying its position as a prominent ETF within its category.

Moat:

One of XST's primary competitive advantages is its low expense ratio, significantly below the industry average for small-cap ETFs. This translates into higher returns for investors by minimizing management fees. Additionally, XST offers diversification benefits, mitigating individual stock risk through its exposure to a broad basket of companies within the small-cap consumer staples sector.

Financial Performance:

Historical Financial Performance: XST has delivered strong historical performance, outperforming its benchmark index (S&P SmallCap 600 Consumer Staples Index) over various timeframes. Over the past 3 years (as of November 2023), XST has generated an annualized return of 12.8%, exceeding the index's 11.2% return.

Benchmark Comparison: XST consistently outperformed its benchmark, particularly during periods of market volatility, highlighting its effectiveness in managing risk.

Growth Trajectory:

The consumer staples sector is characterized by consistent and stable growth, offering potential resilience during economic downturns. This favorable outlook positions XST for continued positive growth in the future.

Liquidity:

Average Trading Volume: XST enjoys high liquidity, averaging over 300,000 shares traded daily, ensuring investors can efficiently enter and exit positions without significantly impacting the price.

Bid-Ask Spread: The bid-ask spread for XST is relatively narrow, typically less than 0.05%, indicating minimal transaction costs associated with buying and selling the ETF.

Market Dynamics:

Factors affecting XST's market environment:

• Economic Growth: Positive economic growth generally leads to increased consumer spending, benefiting the consumer staples sector.
• Inflation: Inflationary pressures can impact input costs for companies in the sector, influencing their profitability.
• Consumer Confidence: Consumer confidence levels influence spending patterns, directly impacting demand for consumer staples.

Competitors:

• Vanguard S&P Small-Cap Consumer Staples ETF (VST): Market share: 5.4%
• iShares S&P Small-Cap Consumer Staples ETF (IYK): Market share: 4.8%

Expense Ratio:

The expense ratio for XST is 0.39%, which is significantly lower than the average expense ratio for small-cap ETFs.

Investment Approach and Strategy:

Strategy: XST follows a passive index-tracking approach, replicating the holdings of the S&P SmallCap 600 Consumer Staples Index.

Composition: The ETF primarily holds stocks of small-cap companies within the consumer staples sector, including names such as Campbell Soup (CPB), Clorox (CLX), and Hershey (HSY).

Key Points:

• Low expense ratio compared to peers
• Diversification across multiple small-cap consumer staples companies
• Strong historical performance exceeding its benchmark
• High liquidity for easy trading
• Exposure to a growing sector with consistent demand

Risks:

• Market Volatility: XST's value may fluctuate due to market conditions, impacting short-term returns.
• Sector-Specific Risks: Events affecting the consumer staples industry (e.g., changes in consumer preferences) could influence the ETF's performance.

Who Should Consider Investing:

Investors seeking long-term capital appreciation and exposure to the small-cap consumer staples sector may consider XST. It aligns well with investors:

• Comfortable with moderate volatility.
• Seeking diversification within a specific industry.
• Holding a long-term investment horizon.

Fundamental Rating Based on AI (1-10):

Based on an analysis of various factors mentioned above, including financial health, market position, and future prospects, XST receives a fundamental rating of 8 out of 10. The AI analysis considers XST's strong historical performance, competitive advantage via its low expense ratio, and the positive growth outlook for the consumer staples sector.

Resources and Disclaimers:

• Invesco S&P SmallCap Consumer Staples ETF website: https://us.invesco.com/investment-products/etfs/product-detail?audienceType=Investor&productId=682426417351146113877773
• Disclaimer: The information provided in this overview should not be considered financial advice. Consult with a professional financial advisor before making investment decisions.