News

Making its debut on 10/26/2005, smart beta exchange traded fund Invesco Building & Construction ETF (PKB) provides investors broad exposure to the Industrials ETFs 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 reflect the market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $276.34 million, making it one of the average sized ETFs in the Industrials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Dynamic Building & Construction Intellidex Index.

The Dynamic Building & Construction Intellidex Index is comprised of stocks of U.S. building and construction 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

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

Annual operating expenses for PKB are 0.62%, which makes it one of the most expensive products in the space.

It has a 12-month trailing dividend yield of 0.25%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

For PKB, it has heaviest allocation in the Industrials sector --about 42.30% of the portfolio --while Consumer Discretionary and Materials round out the top three.

Looking at individual holdings, Home Depot Inc/the (HD) accounts for about 5.40% of total assets, followed by Trane Technologies Plc (TT) and Tractor Supply Co (TSCO).

The top 10 holdings account for about 46.37% of total assets under management.

Performance and Risk

The ETF has added about 6.98% so far this year and is up roughly 26.46% in the last one year (as of 07/11/2024). In the past 52-week period, it has traded between $46.69 and $74.86.

The fund has a beta of 1.34 and standard deviation of 25.39% for the trailing three-year period, which makes PKB a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Building & Construction ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

SPDR S&P Homebuilders ETF (XHB) tracks S&P Homebuilders Select Industry Index. The fund has $1.66 billion in assets. XHB has an expense ratio of 0.35%.

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

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Invesco Building & Construction ETF (PKB): ETF Research Reports

Tractor Supply Company (TSCO) : Free Stock Analysis Report

The Home Depot, Inc. (HD) : Free Stock Analysis Report

SPDR S&P Homebuilders ETF (XHB): ETF Research Reports

Trane Technologies plc (TT) : Free Stock Analysis Report

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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.