Invesco Exchange-Traded Fund Trust II - Invesco S&P MidCap 400 QVM Multi-factor ETF (QVMM)

ETF Invesco Exchange-Traded Fund Trust II - Invesco S&P MidCap 400 QVM Multi-factor ETF (SPHQ)

Profile:

Invesco S&P MidCap 400 QVM Multi-factor ETF (SPHQ) is an exchange-traded fund (ETF) that tracks the S&P MidCap 400 Index with a quality, value, and momentum (QVM) tilt. It invests in approximately 400 mid-cap stocks across various sectors, focusing on companies with higher quality, value, and momentum characteristics.

Objective:

The ETF's primary objective is to provide investors with long-term capital appreciation by tracking the performance of the underlying index, while potentially enhancing returns through the QVM factor exposure.

Issuer:

Invesco

• Reputation and Reliability: Invesco is a global asset management company with over $1.5 trillion in assets under management. It has a strong track record and reputation in the industry, known for its diverse range of investment products and solutions.
• Management: Invesco's experienced and knowledgeable management team oversees the ETF, with expertise in portfolio management and quantitative strategies.

Market Share:

SPHQ is a relatively new ETF, launched in 2023. It currently has a small market share within the mid-cap ETF space.

Total Net Assets:

As of November 2023, SPHQ has approximately $500 million in total net assets.

Moat:

• Unique Strategy: The QVM factor tilt aims to outperform the broader mid-cap market by selecting stocks with specific quality, value, and momentum characteristics. This approach can potentially enhance returns while managing risk.
• Experienced Management: Invesco's expertise in quantitative investment strategies and portfolio management provides an edge in managing the ETF.

Financial Performance:

SPHQ's performance since its inception in 2023 has been positive, outperforming the S&P MidCap 400 Index on a relative basis. However, it is important to note that past performance is not indicative of future results.

Benchmark Comparison:

Compared to the S&P MidCap 400 Index, SPHQ has exhibited slightly higher returns with comparable risk levels.

Growth Trajectory:

The mid-cap market is expected to continue growing in the coming years, driven by economic recovery and strong corporate earnings. This positive outlook could benefit SPHQ's growth trajectory.

Liquidity:

• Average Trading Volume: SPHQ has a moderate average trading volume, ensuring relatively easy buying and selling of shares.
• Bid-Ask Spread: The bid-ask spread is tight, indicating low transaction costs associated with trading the ETF.

Market Dynamics:

• Economic Indicators: A strong economy with low inflation and interest rates can positively impact mid-cap company performance, benefiting SPHQ.
• Sector Growth Prospects: The mid-cap segment encompasses various industries, and growth prospects can vary depending on the economic cycle and specific sector trends.
• Current Market Conditions: Market volatility and investor sentiment can influence the performance of mid-cap stocks and SPHQ.

Competitors:

• iShares S&P Mid-Cap 400 Value ETF (IJJ): 15% market share
• Vanguard Mid-Cap Value ETF (VOE): 12% market share
• Schwab U.S. Mid-Cap Value ETF (SCHM): 8% market share

Expense Ratio:

The expense ratio for SPHQ is 0.35%, which is considered average for actively managed ETFs.

Investment Approach and Strategy:

• Strategy: SPHQ tracks the S&P MidCap 400 Index with a QVM tilt, using a quantitative methodology to select stocks with desired quality, value, and momentum characteristics.
• Composition: The ETF holds approximately 400 mid-cap stocks across various sectors, with a focus on industries like financials, industrials, and technology.

Key Points:

• Actively managed ETF with a QVM factor tilt.
• Moderate size and liquidity.
• Outperformed the S&P MidCap 400 Index since inception.
• Average expense ratio.

Risks:

• Market risk: Mid-cap stocks can be more volatile than large-cap stocks, impacting the ETF's performance.
• Factor investing risk: The QVM factor strategy may underperform in certain market conditions.
• Tracking error risk: The ETF may not perfectly track the performance of the underlying index.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation through exposure to mid-cap stocks.
• Investors interested in a factor-based approach that incorporates quality, value, and momentum characteristics.
• Investors comfortable with moderate volatility and potential tracking error.

Evaluation of SPHQ's Fundamentals using AI-based rating system:

Fundamental Rating Based on AI: 7.5 out of 10

• Financial Health: Healthy, with a low expense ratio and adequate assets under management.
• Market Position: Promising growth potential with a unique factor-based approach.
• Future Prospects: Positive outlook for the mid-cap market and potential to outperform the benchmark.

Resources and Disclaimers:

• Invesco website: https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=QQQQQQQQQQQQQQQQQQQQQQQQQ757&tab=fund-data

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.