A sound investment process and strong management team underpin Invesco S&P 500® Top 50 ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and an underweight in yield exposure compared with category peers. High quality exposure is attributed to stocks with low financial leverage and strong returns on equity. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. 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

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Eli Lilly

JPMorgan Chase & Co

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Invesco S&P 500® Top 50 ETF earns an Above Average Process Pillar rating. The most significant contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the process was successful over that period. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 42%. 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 relatively low success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the investment results (before fees and expenses) of the S&P 500® Top 50 Index (the "underlying index").  The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index. The index provider compiles, maintains and calculates the underlying index, and which consists of the 50 largest companies in the S&P 500® Index based on float-adjusted market capitalization. The underlying index's components are weighted by float-adjusted market capitalization. The fund is non-diversified. 

 The portfolio is overweight in technology and communication services relative to the category average by 13.5 and 5.7 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and financial services, underweight the average by 10.0 and 3.0 percentage points of assets, respectively. The portfolio is positioned across 54 holdings and is relatively top-heavy. Of the strategy's assets, 56.0% are concentrated within the top 10 holdings, as opposed to the category’s 48.8% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 5% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Invesco S&P 500® Top 50 ETF's strong equity team drives the strategy's Above Average People Pillar rating. There are four managers listed on the fund: Michael Jeanette, Peter Hubbard, Tony Seisser, Pratik Doshi. Experience on the team is abundant, with 12 years of average portfolio management experience. Together, they manage a total of 144 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate. This group has successfully retained management talent, with no departures in the past five years. 

 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.

People

Invesco succeeds in a number of areas but also has its share of subpar offerings, along with many others that land somewhere in the middle. A mid-2023 change of CEO, from longtime chief Marty Flanagan to veteran Invesco executive Andrew Schlossberg, is noteworthy, and several other executives retired or departed in 2023. Portfolio-manager shuffles aimed at bolstering poor performers, which began under Flanagan, have continued under Schlossberg, who told Morningstar his most important aim is bolstering “investment quality.” However, major changes of direction or approach are unlikely. The firm retains a Morningstar Parent rating of Average. 
Invesco’s international-equity teams in Texas and New York remain solid. However, the extensive U.S.-equity lineup needs improvement. Fixed-income offerings run the gamut: The multisector and short-term-bond areas are good, but corporate high-yield is less impressive. The firm’s exchange-traded fund lineup includes the popular Nasdaq-focused QQQ; passive strategies make up around 37% of Invesco’s assets under management. Invesco has not been averse to trying new types of strategies, and it was among the firms that immediately launched a spot bitcoin ETF after SEC approval in early 2024.
The picture outside the United States is mixed. Fund performance has been subpar in Asia, and while the picture has brightened in the United Kingdom and Europe, that region still can’t be considered a strength.

Average

Parent

Invesco S&P 500 Top 50 ETF

XLG tracks a market-cap-weighted index of the 50 largest US companies.

Invesco S&P 500® Top 50 ETF is a passively managed ETF that seeks to replicate the performance of the S&P 500 Top 50 Index. The XLG ETF's top holdings include Microsoft, Apple, Nvidia, Amazon, and Meta Platforms, reflecting a heavy concentration in the tech sector. Pros of investing in XLG include access to large and influential companies, potential for high returns, and diversification, while cons include concentration risk, exposure to tech sector volatility, and high valuations.

XLG: The Biggest Of The Big

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The S&P 500 is a weighted fund that holds 500 profitable corporations. Firms with the largest market caps have the largest concentrations within the fund.

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Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Invesco S&P 500 Top 50 ETF (XLG) is a passively managed exchange traded fund launched on 05/04/2005.

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Large-cap stocks have seen a significant rally, but history suggests a possible pullback in the next four weeks. The Invesco S&P 500 Top 50 ETF is overbought and has weak seasonal trends. XLG is heavily invested in the Information Technology sector, making it vulnerable to a sector pullback should momentum retreat.

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The fourth-quarter earnings for "Magnificent Seven" are expected to grow 38.4% from the same period last year on 12.4% higher revenues.

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XLG: A Wonderful Buffett-Style ETF You've Never Heard Of

The "Magnificent Seven" tech mega-caps (Alphabet, Apple, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla) have outperformed in 2023. Valuations for these stocks are at all-time highs, with a P/E ratio of 29x compared to 19x for the S&P 500. The Invesco S&P 500 Top 50 ETF is a fund that aims to replicate the S&P 500 Top 50 Index, representing the largest 50 stocks in the S&P 500.

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For investors seeking momentum, Invesco S&P 500 Top 50 ETF XLG is probably on the radar. The fund just hit a 52-week high and is up 35% from its 52-week low price of $27.08/share.

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Large and mega-cap stocks have underperformed over the long term due to slower earnings growth, making their current valuation premium concerning. Invesco S&P 500® Top 50 ETF is heavily skewed towards expensive technology stocks, with a 38% weighting compared to 28% for the S&P500. The rise in retail investors, particularly in options markets, has driven the anomaly in mega-cap relative valuations, but this may not be sustainable in the next bear market.

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The "disposition effect" in behavioral finance explains why investors sell their winners first and hold onto their losers, creating a self-fulfilling cycle. The S&P 500's biggest names have been the winners this year, while small-caps have underperformed. The Invesco S&P 500® Top 50 ETF is at risk due to its concentration in mega-cap stocks and the potential impact of the disposition effect.

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News for Invesco S&P 500 Top 50 ETF ETF (XLG)