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

The Invesco S&P SmallCap Quality ETF (XSHQ) made its debut on 04/06/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.What Are Smart Beta ETFs?Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.Fund Sponsor & IndexManaged by Invesco, XSHQ has amassed assets over $251.48 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund 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.Cost & Other ExpensesInvestors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.Annual operating expenses for XSHQ are 0.29%, which makes it on par with most peer products in the space.It has a 12-month trailing dividend yield of 1.19%.Sector Exposure and Top HoldingsEven though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.For XSHQ, it has heaviest allocation in the Financials sector --about 23.1% of the portfolio --while Industrials and Information Technology round out the top three.When you look at individual holdings, Brinker International Inc (EAT) accounts for about 2.83% of the fund's total assets, followed by Clear Secure Inc (YOU) and Armstrong World Industries Inc (AWI).Its top 10 holdings account for approximately 20.82% of XSHQ's total assets under management.Performance and RiskSo far this year, XSHQ has gained about 13.29%, and is up about 19.75% in the last one year (as of 06/26/2026). During this past 52-week period, the fund has traded between $40.02 and $47.50.The ETF has a beta of 0.94 and standard deviation of 19.49% for the trailing three-year period. With about 120 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 $83.09 billion in assets, iShares Core S&P Small-Cap ETF has $108.83 billion. IWM has an expense ratio of 0.19% and IJR changes 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 BlendBottom 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.Boost Your Portfolio with Our Top ETF InsightsZacks' exclusive Fund Newsletter delivers actionable information, top news and analysis, as well as top-performing ETFs, straight to your inbox every week.Don’t miss out on this valuable resource. It’s free!Get it now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks