XMHQ: The Winning Streak Can Continue

seekingalpha06-03

pepifotoMuch as we may want to diversify, when looking past mega cap stocks, the options are limited. Small caps (IWM) are one area of interest, but their frustrating underperformance shows no sign of...

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Small caps (IWM) are one area of interest, but their frustrating underperformance shows no sign of...</p>\n\n<a href=\"https://seekingalpha.com/article/4697101-xmhq-etf-winning-streak-can-continue\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>XMHQ: The Winning Streak Can Continue</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nXMHQ: The Winning Streak Can Continue\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-06-03 20:18 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4697101-xmhq-etf-winning-streak-can-continue><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>pepifotoMuch as we may want to diversify, when looking past mega cap stocks, the options are limited. Small caps (IWM) are one area of interest, but their frustrating underperformance shows no sign of...</p>\n\n<a href=\"https://seekingalpha.com/article/4697101-xmhq-etf-winning-streak-can-continue\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"VO","symbol_name":"Vanguard Mid-Cap ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4697101-xmhq-etf-winning-streak-can-continue","article_id":"2440460091","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1493832785/image_1493832785.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2440460091","pubTimestamp":1717417117,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"pepifotoMuch as we may want to diversify, when looking past mega cap stocks, the options are limited. Small caps  are one area of interest, but their frustrating underperformance shows no sign of abating. Mid-cap stocks could have more potential, but still perform poorly compared to the broader market. However, the Invesco S&P MidCap Quality ETF  employs a fundamental scan for \"quality\" and it shows impressive performance over the last 18 months. Introducing XMHQ XMHQ was launched by Invesco in 2006. It is a passively managed ETF with $4.8B in AUM which seeks to track the S&P MidCap 400Quality Index. This underlying Index employs fundamental scans to select quality stocks and this makes it quite different from the majority of passively managed funds. We so often see ETFs select stocks and weight them based on market capitalization, GICS classification or metrics such as volatility or momentum. A measure of quality is something different, but harder to define. So what exactly constitute","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"VO":"Vanguard Mid-Cap ETF","XLI":"工业指数ETF-SPDR","TNA":"罗素2000指数三倍做多ETF-Direxion","BK4581":"高盛持仓","RWM":"罗素2000指数反向ETF","IWM":"罗素2000指数ETF","UWM":"罗素2000指数ETF两倍做多","TZA":"罗素2000指数三倍做空ETF","XLY":"消费品指数ETF-SPDR可选消费品","IWN":"罗素2000价值股指数ETF-iShares","BK4585":"ETF&股票定投概念","SRTY":"罗素2000指数三倍做空ETF-ProShares","BK4534":"瑞士信贷持仓","IWO":"罗素2000成长股指数ETF","BK4535":"淡马锡持仓","TWM":"罗素2000指数两倍做空ETF","XMHQ":"Invesco S&P MidCap Quality ETF","BK4550":"红杉资本持仓","BK4588":"碎股","XLF":"金融ETF"},"translate_title":"XMHQ：连胜可以继续","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XMHQ":1,"XLY":1,"XLI":1,"XLF":1,"VO":1,"IWM":1,"RWM":0.6,"UWM":0.6,"TZA":0.6,"TWM":0.6,"TNA":0.6,"SRTY":0.6,"IWO":0.6,"IWN":0.6,"MRTYmain":0.6,"MNQmain":0.6},"content_text":"pepifotoMuch as we may want to diversify, when looking past mega cap stocks, the options are limited. Small caps (IWM) are one area of interest, but their frustrating underperformance shows no sign of abating. Mid-cap stocks could have more potential, but still perform poorly compared to the broader market. However, the Invesco S&P MidCap Quality ETF (NYSEARCA:XMHQ) employs a fundamental scan for \"quality\" and it shows impressive performance over the last 18 months. Introducing XMHQ XMHQ was launched by Invesco in 2006. It is a passively managed ETF with $4.8B in AUM which seeks to track the S&P MidCap 400®Quality Index. This underlying Index employs fundamental scans to select quality stocks and this makes it quite different from the majority of passively managed funds. We so often see ETFs select stocks and weight them based on market capitalization, GICS classification or metrics such as volatility or momentum. A measure of quality is something different, but harder to define. So what exactly constitutes as \"quality\"? In short, according to the prospectus, \"companies that seek to generate higher revenue and cash flow than their counterparts through prudent use of assets and finances.\" This is determined by three factors -    (1) return on equity (calculated as the company’s trailing 12-month earnings per share divided by the company’s latest book value per share)  (2) accruals ratio (computed using the change of the company’s net operating assets over the last year divided by the company’s average total assets over the last two years) (3) financial leverage ratio (calculated as the company’s latest total debt divided by the company’s book value)  These fundamental ratios are then converted into Z-scores and averaged to provide a Quality score. 80 stocks with the highest scores from the S&P Midcap 400 Index, which generally represents the U.S. mid-capitalization equities market, are selected for the Index. They are weighted by a combination of market capitalization and Quality score. The weighting process does put limits of individual stocks and sectors to ensure diversification. The minimum weight of each component stock is 0.05%, and the maximum weight is the lesser of 5% or 20 times its market capitalization weight in the Parent Index. No sector (according to GICS®) comprises more than 40% of the Underlying Index. The Underlying Index is rebalanced semi-annually after market close on the third Friday of June and December.  All this leads to a sector exposure which looks like this - Sector Exposure (Seeking Alpha)Industrials are by far the largest sector in the fund, which is a good sign as the sector has performed well over the past year. That said, this is a bit of a case of the tail wagging the dog - the quality scores should pick up stocks in well performing sectors. While we can't accurately track the changes in sectors exposure, we can look back at previous Seeking Alpha articles. Industrials still topped the allocation a year ago, but financials have moved higher at the expense of consumer discretionary. Exposure April 2023 (Seeking Alpha)This is again an encouraging sign as financials (XLF) and industrials (XLI) have significantly outperformed consumer discretionary (XLY) over the past year. Sector Comparisons (SPDR Sectors)Currently, the top 10 holdings look like this - Top 10 Holdings (Seeking Alpha)This composition makes XMHQ quite concentrated in its top 10 holdings, at least compared to other mid-cap funds, which tend to be much more diversified than funds containing mega-cap stocks.  % in Top 10 (Etfdb,com)This concentration can be beneficial when the top 10 perform well. XMHQ Performance XMHQ has significantly outperformed the benchmark, the Vanguard Mid Cap ETF (VO) over the last year. Data by YCharts This outperformance extends across most funds in the mid-cap space.  Performance Table (Etfdb.com)XMHQ also comes second place in Seeking Alpha's Quant Ratings in its Sub Class. Quant Ratings (Seeking Alpha)Its long-term performance is less impressive, but still compares well with VO. It has outperformed 6 years out of the 11 shown. XMHQ v VO (Portfolio Visualizer)The cumulative performance is much better due to the gains of the last two years. XMHQ v VO (Portfolio Visualizer)The big question is whether the good performance will continue. Due to the fund's rotation out of poor performing sectors and into better sectors and stocks, I think there is a good chance it does, but this is, of course, not guaranteed. Other Metrics XMHQ has a dividend yield of 0.6% TTM. This is not the fund or the space to look for yield. The 0.25% expense ratio is on the high side, but can be justified as long as the fund performs well. Liquidity is excellent and I see no other red flags. Risks Risks come from the relatively high concentration in industrials and the top 10 stocks. Due to the semi-annual rebalancing, should the sector, or the top 10 start to perform poorly, the fund will be slow to adjust and could outperform other funds in the space. Mid-cap stocks are generally higher risk than large cap stocks. The quality screening should insulate XMHQ from very high risk companies, but the sub-class as a whole is usually more volatile. Conclusions  XMHQ provides an alternative to mega cap stocks and ETFs and a welcome change from the common selection process employed by the majority funds. By using fundamental scans to select quality stocks, it has managed to significantly outperform over the last 18 months. The selection process may not always work, but the changes in the portfolio composition over the past year suggest XMHQ does tend to pick winning stocks and sectors.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2440460091"}