The Invesco S&P 500 GARP ETF (NYSE:SPGP) was launched on 06/17/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Growth segment of the US equity market.

The fund is sponsored by Invesco. It has amassed assets over $4.98 billion, making it one of the larger ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Large cap companies usually have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. 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 1.28%.

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.

This ETF has heaviest allocation to the Energy sector--about 24.80% of the portfolio. Information Technology and Materials round out the top three.

Looking at individual holdings, Diamondback Energy Inc (NASDAQ:FANG) accounts for about 2.49% of total assets, followed by Marathon Petroleum Corp (NYSE:MPC) and Steel Dynamics Inc (NASDAQ:STLD).

The top 10 holdings account for about 20.39% of total assets under management.

Performance and Risk

SPGP seeks to match the performance of the S&P 500 GROWTH AT A REASONABLE PRICE IDX before fees and expenses. The S&P 500 Growth at a Reasonable Price Index is composed of securities with strong growth characteristics selected from the Russell Top 200 Index.

The ETF has added roughly 7.06% so far this year and is up about 24.48% in the last one year (as of 05/20/2024). In the past 52-week period, it has traded between $84.30 and $106.72.

The ETF has a beta of 1.10 and standard deviation of 17.94% for the trailing three-year period. With about 77 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P 500 GARP 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, SPGP is a good option for those seeking exposure to the Style Box - Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard Growth ETF (NYSE:VUG) and the Invesco QQQ (NASDAQ:QQQ) track a similar index. While Vanguard Growth ETF has $123.57 billion in assets, Invesco QQQ has $266.83 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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