Invesco Dynamic Leisure and Entmnt ETF earns a Morningstar Medalist Rating of Negative with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy gets a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in momentum exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And momentum exposure is rooted in holding stocks currently on a winning streak. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Airbnb

Booking Hlds

Chipotle

Marriott

Royal Caribbean Cruises

Delta Air Lines

Warner Bros Discovery Inc

Las Vegas Sands

Lions Gate Entertainment Corp. - Ordinary Shares - Class A

Cinemark Holdings

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Invesco Dynamic Leisure and Entmnt ETF earns a Low Process Pillar rating. 

The largest detractor from the rating is the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 67% also limits the process. The parent firm's five-year risk-adjusted success ratio of 39% further detracts from the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy tends to hold smaller, deeper value companies compared with its average peer in the Consumer Cyclical Morningstar Category. Examining additional factor exposure, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years.  Lacking this ballast, the fund's prospects will rest on its ability to supersede peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. The strategy also had more exposure to high-momentum stocks compared with Morningstar Category peers in the most recent month. Momentum is based on the premise that market outperformers will continue to outperform, and laggards will continue to lag. This means that managers are overweighting stocks currently on a winning streak.  In addition, the strategy had less exposure to high-yield stocks compared with Morningstar Category peers in recent months. Its preference for stocks with lower yields may well lead to a growthier portfolio. However, growth stocks court additional risks if their forecasts do not come to fruition and are often more volatile than companies with stable dividends.  More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in communication services and industrials relative to the category average by 18.4 and 8.9 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and consumer defensive, with consumer cyclical underweighting the average portfolio by 25.4 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 30 holdings and is diversified among those holdings. In its most recent portfolio, 46.1% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 48.6%. And in closing, in terms of portfolio turnover, this portfolio trades more frequently than the average peer in its category, which may result in higher trading costs for investors and cause a drag on performance.

Process

Invesco’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Tony Seisser, Peter Hubbard, Pratik Doshi, Michael Jeanette. The team is well equipped, with an average of 11 years of portfolio management experience. Together, they manage a total of 142 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Invesco, with USD 1.3 trillion in AUM, tries to cover a great many bases. The firm succeeds in a number of areas but also has its share of subpar offerings, along with many others somewhere in the middle. The firm retains a Morningstar Parent rating of Average.
Invesco is now 3.5 years past the closing of its merger with OppenheimerFunds. While there were some glitches, overall the process avoided the pitfalls that can accompany such corporate actions. On the positive side, Invesco’s international-equity teams—its EQV team in Texas and the New York-based group inherited from Oppenheimer—remain strong points. The firm’s ETF lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 30% of Invesco’s AUM. 
However, the extensive U.S.-equity lineup remains a weak link despite manager shuffles aimed at bolstering poor performers. The retirement of Meggan Walsh, who managed the relatively few appealing offerings in that group, didn’t help. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive.
Invesco has a substantial presence outside the U.S., but fund performance has been subpar in Asia, with manager turnover an ongoing concern. In the U.K. and Europe, the picture has brightened, but that region still can’t be considered a strength.

Average

Parent

Invesco Dynamic Leisure and Entertainment ETF

PEJ tracks a multi-factor, tiered equal-weighted index of US entertainment and leisure industry stocks.

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Designed to provide broad exposure to the Consumer Discretionary ETFs category of the market, the Invesco Leisure & Entertainmen (PEJ) is a smart beta exchange traded fund launched on 06/23/2005.

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PEJ tracks an Index of 30 companies in the leisure and entertainment industries and reconstitutes quarterly. The expense ratio is 0.55%, and the ETF has $441M in assets under management. PEJ is an inconsistent performer, regularly ranking near the top or bottom compared to 13 other peers. Its compounded returns also lag passive alternatives like XLY and RCD.

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