The Small Cap ETF With $2.2 Billion in Assets That Keeps Beating All Benchmarks Needs To Be Studied

"Small-cap momentum strategies offer targeted exposure to smaller companies with strong recent performance, but the question is whether that tilt justifies added volatility. Invesco S&P SmallCap Momentum ETF (NYSEARCA:XSMO) applies a momentum screen to the S&P SmallCap 600 universe, concentrating holdings in approximately 120 stocks showing the strongest price and earnings trends. The decision hinges on whether momentum factor outperformance justifies higher sector concentration and amplified swings."

"XSMO serves as a tactical small-cap growth allocation for investors who believe recent winners will continue outperforming. The fund tracks the S&P SmallCap 600 Momentum Index, selecting stocks based on price momentum over six and twelve months combined with fundamental momentum signals. This produces a portfolio heavily weighted toward Industrials (29.2%), Financials (16%), and Consumer Discretionary (15.6%)-sectors that tend to lead during economic expansion."

"The return engine depends on momentum persistence: stocks with strong recent performance continuing to outpace peers. This differs fundamentally from value or quality strategies. At 0.36% annually, the fund sits in a reasonable cost range for a factor-based strategy. Its $2.2 billion in assets signals sufficient institutional adoption to support liquidity, while the relatively modest single-stock concentration-no position exceeds 3.74%-means the momentum tilt is expressed broadly rather than through a handful of concentrated bets."

XSMO applies a momentum screen to the S&P SmallCap 600 and concentrates roughly 120 stocks with the strongest price and earnings trends. Selection uses combined six- and twelve-month price momentum and fundamental momentum signals. The portfolio is heavily weighted to Industrials (29.2%), Financials (16%), and Consumer Discretionary (15.6%). The fund charges 0.36% and manages about $2.2 billion, with no single position exceeding 3.74%. XSMO aims to capture momentum persistence as a tactical small-cap growth allocation. Recent performance shows a one-year return of 17.06%, outperforming IWM (16.19%) and SPSM (13.02%).

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