Is Invesco Dynamic Leisure and Entertainment ETF (PEJ) a strong ETF right now?

LLaunched on 23/06/2005, the Invesco Dynamic Leisure and Entertainment (PEJ) ETF is a smart beta exchange-traded fund offering broad exposure to the consumer discretionary ETF category of the market.

What are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market-cap-weighted indexes, a strategy created to mirror the particular market or market segment.

Market-cap-weighted indices offer an inexpensive, convenient, and transparent way to replicate market returns and are a good option for investors who believe in market efficiency.

However, some investors believe in beating the market through exceptional stock selection and choose another type of fund that follows non-cap-weighted strategies: smart beta.

Based on specific fundamental characteristics, or a combination thereof, these indices attempt to select stocks that have the best chance of risk-return performance.

Even though this space offers many choices for investors – think of one of the simplest methodologies like equal weighting and the most complicated ones like fundamental weighting and volatility/momentum – not all of them have been able to provide top notch results.

Fund Sponsor and Index

The fund is managed by Invesco. PEJ was able to amass assets of over $1.05 billion, making it one of the largest ETFs among consumer discretionary ETFs. PEJ seeks to match the performance of the Dynamic Leisure & Entertainment Intellidex Index before fees and expenses.

The Dynamic Leisure & Entertainment Intellidex Index is comprised of stocks of US leisure and entertainment companies. The index is designed to provide capital appreciation by carefully evaluating companies against a variety of investment criteria, including fundamental growth, stock valuation, investment desirability and risk factors.

Cost and other expenses

When considering the total return of an ETF, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins ​​in the long run if all other factors remain equal.

PEJ’s annual operating expense is 0.55%, putting it on par with most peer products in the space.

It has a 12-month dividend yield of 0.65%.

Sector exposure and main holdings

Although ETFs provide diversified exposure that minimizes single-stock risk, it’s still important to review a fund’s holdings before investing. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.

PEJ’s heaviest allocation is in the consumer discretionary sector, which represents approximately 52.40% of the portfolio. Its telecommunications and consumer staples round out the top three.

When looking at individual holdings, Sysco Corp (SYY) makes up around 5.55% of the fund’s total assets, followed by Liberty Media Corp-Liberty Formula One (FWONA) and Live Nation Entertainment Inc (LYV).

The top 10 holdings represent approximately 46.78% of total assets under management.

Performance and risks

The ETF has lost around -20.43% so far this year and is down around -20.91% over the past year (as of 7/28/2022). Over the past 52-week period, it traded between $35.63 and $53.27.

The fund has a beta of 1.31 and a standard deviation of 35.43% for the three-year period, making PEJ a high-risk pick in this particular space. With around 31 holdings, it has more concentrated exposure than its peers.

Alternatives

Invesco Dynamic Leisure and Entertainment ETF is a reasonable option for investors looking to outperform the consumer discretionary ETF segment of the market. However, there are other ETFs in the space that investors might consider.

Global X Video Games & Esports ETF (HERO) follows SOLACTIVE VIDEO GAMES & ESPORTS INDEX and VanEck Video Gaming and eSports ETF (ESPO) follows MVIS GLOBAL VIDEO GAMING AND ESPORTS IND. Global X Video Games & Esports ETF has $198.75 million in assets, VanEck Video Gaming and eSports ETF has $329.34 million. HERO has an expense ratio of 0.50% and ESPO charges 0.55%.

Investors looking for cheaper, lower-risk options should consider traditional market-cap-weighted ETFs that aim to match the returns of consumer discretionary ETFs.

Conclusion

To learn more about this product and other ETFs, research products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.

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Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports

Sysco Corporation (SYY): Free Inventory Analysis Report

ETF Global X Video Games & Esports (HERO): ETF Research Reports

Live Nation Entertainment, Inc. (LYV): Free Stock Analysis Report

Liberty Media Corporation (FWONA): Free Stock Analysis Report

VanEck Video Gaming and eSports ETF (ESPO): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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