Should Invesco S&P MidCap Momentum ETF (XMMO) Be on Your Investing Radar?

If you're interested in broad exposure to the Mid Cap Growth segment of the US equity market, look no further than the Invesco S&P MidCap Momentum ETF (XMMO), a passively managed exchange traded fund launched on 03/03/2005.

The fund is sponsored by Invesco. It has amassed assets over $2.81 billion, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

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. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.34%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.44%.

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 to the Industrials sector--about 37.50% of the portfolio. Information Technology and Consumer Discretionary round out the top three.

Looking at individual holdings, Vistra Corp (VST) accounts for about 4.95% of total assets, followed by Manhattan Associates Inc (MANH) and Lennox International Inc (LII).

The top 10 holdings account for about 27.4% of total assets under management.

Performance and Risk

XMMO seeks to match the performance of the S&P MIDCAP 400 MOMENTUM INDEX before fees and expenses. The S&P Midcap 400 Momentum Index is composed of securities with strong growth characteristics selected from the Russell Midcap Index.

The ETF return is roughly 27.12% so far this year and was up about 55.41% in the last one year (as of 05/31/2024). In the past 52-week period, it has traded between $73.38 and $117.53.

The ETF has a beta of 0.99 and standard deviation of 21.07% for the trailing three-year period. With about 80 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap 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, XMMO is a good option for those seeking exposure to the Style Box - Mid Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Mid-Cap Growth ETF (VOT) and the iShares Russell Mid-Cap Growth ETF (IWP) track a similar index. While Vanguard Mid-Cap Growth ETF has $12.95 billion in assets, iShares Russell Mid-Cap Growth ETF has $13.88 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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 MidCap Momentum ETF (XMMO): ETF Research Reports

Lennox International, Inc. (LII) : Free Stock Analysis Report

Manhattan Associates, Inc. (MANH) : Free Stock Analysis Report

iShares Russell Mid-Cap Growth ETF (IWP): ETF Research Reports

Vanguard Mid-Cap Growth ETF (VOT): ETF Research Reports

Vistra Corp. (VST) : Free Stock Analysis Report

To read this article on Zacks.com click here.

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.

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