Is Invesco Leisure and Entertainment ETF (PEJ) a Strong ETF Right Now?

A smart beta exchange traded fund, the Invesco Leisure and Entertainment ETF (PEJ) debuted on 06/23/2005, and offers broad exposure to the Consumer Discretionary ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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 & Index

The fund is managed by Invesco, and has been able to amass over $331.78 million, which makes it one of the larger ETFs in the Consumer Discretionary ETFs. PEJ, before fees and expenses, seeks to match the performance of the Dynamic Leisure & Entertainment Intellidex Index.

The Dynamic Leisure & Entertainment Intellidex Index is comprised of stocks of U.S. leisure and entertainment companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

Cost & Other Expenses

Expense 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 PEJ are 0.57%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.12%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Discretionary sector - about 62.10% of the portfolio. Telecom and Industrials round out the top three.

When you look at individual holdings, Doordash Inc (DASH) accounts for about 5.88% of the fund's total assets, followed by Royal Caribbean Cruises Ltd (RCL) and Sysco Corp (SYY).

Its top 10 holdings account for approximately 45.33% of PEJ's total assets under management.

Performance and Risk

Year-to-date, the Invesco Leisure and Entertainment ETF has gained about 2.82% so far, and is up roughly 21.96% over the last 12 months (as of 06/03/2025). PEJ has traded between $42.41 and $57.72 in this past 52-week period.

PEJ has a beta of 1.22 and standard deviation of 22.64% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Leisure and Entertainment ETF is a reasonable option for investors seeking to outperform the Consumer Discretionary ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Global X Video Games & Esports ETF (HERO) tracks SOLACTIVE VIDEO GAMES & ESPORTS INDEX and the VanEck Video Gaming and eSports ETF (ESPO) tracks MVIS GLOBAL VIDEO GAMING AND ESPORTS IND. Global X Video Games & Esports ETF has $145.82 million in assets, VanEck Video Gaming and eSports ETF has $355.76 million. HERO has an expense ratio of 0.50% and ESPO charges 0.56%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Consumer Discretionary ETFs.

Bottom Line

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.

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

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research