Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the Invesco S&P SmallCap Momentum ETF (XSMO) is a passively managed exchange traded fund launched on 03/03/2005.
The fund is sponsored by Invesco. It has amassed assets over $1.35 billion, making it one of the larger ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Additionally, growth stocks have a greater level of risk 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.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.39%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.89%.
Sector Exposure and Top Holdings
Even 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.
This ETF has heaviest allocation to the Financials sector--about 19.10% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Corcept Therapeutics Inc (CORT) accounts for about 3.45% of total assets, followed by Brinker International Inc (EAT) and Mr Cooper Group Inc (COOP).
The top 10 holdings account for about 22.31% of total assets under management.
Performance and Risk
XSMO seeks to match the performance of the S&P SMALLCAP 600 MOMENTUM INDEX before fees and expenses. The S&P Smallcap 600 Momentum Index is composed of securities with strong growth characteristics selected from the Russell 2000 Index.
The ETF has lost about -6.33% so far this year and is up about 6.36% in the last one year (as of 04/29/2025). In the past 52-week period, it has traded between $55.15 and $73.72.
The ETF has a beta of 1.04 and standard deviation of 23.05% for the trailing three-year period. With about 118 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P SmallCap Momentum 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, XSMO is a sufficient option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $10.78 billion in assets, Vanguard Small-Cap Growth ETF has $17.12 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Bottom-Line
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 S&P SmallCap Momentum ETF (XSMO): ETF Research Reports Brinker International, Inc. (EAT): Free Stock Analysis Report Corcept Therapeutics Incorporated (CORT): Free Stock Analysis Report iShares Russell 2000 Growth ETF (IWO): ETF Research Reports Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports MR. COOPER GROUP INC (COOP): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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