If you’re interested in broad exposure to the Large Cap Growth segment of the US equity market, look no further than the Invesco Defensive Equity ETF (DEF), a passively managed exchange traded fund launched on 12/15/2006.
The fund is sponsored by Invesco. It has amassed assets over $247.02 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Large cap companies typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Further, growth stocks have a higher level of volatility associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.55%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.22%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector–about 22.70% of the portfolio. Industrials and Consumer Staples round out the top three.
Looking at individual holdings, Lockheed Martin Corp (LMT) accounts for about 1.37% of total assets, followed by Archer-Daniels-Midland Co (ADM) and Northrop Grumman Corp (NOC).
The top 10 holdings account for about 12.64% of total assets under management.
Performance and Risk
DEF seeks to match the performance of the Guggenheim Defensive Equity Index before fees and expenses. The Invesco Defensive Equity Index is designed to provide exposure to securities of large-cap US issuers.
The ETF has lost about -11.90% so far this year and is down about -1.93% in the last one year (as of 06/30/2022). In the past 52-week period, it has traded between $60.64 and $73.11.
The ETF has a beta of 0.86 and standard deviation of 22.15% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Invesco Defensive Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, DEF is a good option for those seeking exposure to the Style Box – Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Growth ETF (VUG) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $67.31 billion in assets, Invesco QQQ has $155.22 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
To 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.
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Invesco Defensive Equity ETF (DEF): ETF Research Reports
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
Northrop Grumman Corporation (NOC): Free Stock Analysis Report
Archer Daniels Midland Company (ADM): Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
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Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.