Is Invesco S&P SmallCap Quality ETF (XSHQ) a Strong ETF Right Now?

The Invesco S&P SmallCap Quality ETF (XSHQ) was launched on 04/06/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.What Are Smart Beta ETFs?Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.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.On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.Fund Sponsor & IndexManaged by Invesco, XSHQ has amassed assets over $462.61 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the SmallCap 600 Quality Index.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.Cost & Other ExpensesExpense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.Annual operating expenses for XSHQ are 0.29%, which makes it on par with most peer products in the space.It's 12-month trailing dividend yield comes in at 1.15%.Sector Exposure and Top HoldingsWhile 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.XSHQ's heaviest allocation is in the Industrials sector, which is about 23.40% of the portfolio. Its Financials and Consumer Discretionary round out the top three.When you look at individual holdings, Armstrong World Industries Inc (AWI) accounts for about 2.35% of the fund's 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 RiskYear-to-date, the Invesco S&P SmallCap Quality ETF return is roughly 2.74% so far, and is up about 14.13% over the last 12 months (as of 02/06/2025). XSHQ has traded between $38.22 and $47.59 in this past 52-week period.The ETF has a beta of 0.99 and standard deviation of 21.52% for the trailing three-year period. With about 122 holdings, it effectively diversifies company-specific risk.AlternativesInvesco S&P SmallCap Quality ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $75.27 billion in assets, iShares Core S&P Small-Cap ETF has $90 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Blend.Bottom LineTo 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.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report 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 ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks