SPMO ETF: A Closer Look at Performance and Holdings
The Invesco S&P 500 Momentum ETF (SPMO) has been a standout performer in the first half of the year, tracking the S&P 500 Momentum Index with a focus on around 100 high-momentum stocks from the S&P 500. Let's delve into the analysis of its strengths and weaknesses, along with a snapshot of its top 10 holdings based on the most recent data available.
**Pros of SPMO:**
1. **Impressive Historical Performance:** Since its inception in 2015, SPMO has delivered remarkable total returns of 338.1%, surpassing the broader S&P 500's performance of 231.2%. In 2024 alone, it boasted a return of 45.81%, compared to the S&P 500's 25.02%, making it an attractive option for growth-oriented investors.
2. **Momentum Strategy:** Capitalizing on high-momentum stocks, SPMO leverages persistent price trends, particularly beneficial during bullish market phases, especially in sectors like technology and financials.
3. **Cost-Effective:** With a modest expense ratio of 0.13%, SPMO stands out as a cost-efficient choice among its peers, appealing to investors interested in momentum strategies.
4. **Optimized Rebalancing:** SPMO undergoes semi-annual rebalancing in March and September, ensuring alignment with strong-performing stocks while shedding underperformers, thus enhancing potential returns.
5. **Strong Ratings:** Garnering a 5-star Morningstar rating for both 3- and 5-year periods, SPMO demonstrates robust risk-adjusted returns.
Cons of SPMO
1. High Concentration Risk: The top 10 holdings account for nearly 60% of the portfolio, with significant weight in mega-cap stocks like NVIDIA (13.17%). This concentration increases vulnerability to corrections in a few key stocks.
2. Higher Volatility: Momentum strategies are inherently volatile, as stocks with strong price trends can experience sharp corrections, especially during market downturns. SPMO’s max drawdown was -30.95% in a down year, only slightly better than broader market ETFs like VOO (-33.99%).
3. Tax Inefficiency: Frequent rebalancing leads to higher turnover, potentially resulting in more taxable capital gains distributions compared to broader market ETFs like SPY, which has lower turnover. Holding SPMO in a tax-advantaged account like an IRA is recommended.
4. Sector Bias: SPMO has heavy exposure to technology (e.g., NVIDIA, Amazon) and financials (23.15% vs. SPY’s 13.65%), which can underperform if these sectors face headwinds.
5. Lower Dividend Yield: SPMO’s dividend yield is 0.46%, significantly lower than SPY’s 1.17%, making it less appealing for income-focused investors.
Top 10 Holdings as of April 2025
NVIDIA Corp 10.24%
META Meta Platforms Inc 8.94%
AMZN Amazon.com Inc. 8.36%
AVGO Broadcom Inc 5.80%
JPM JPMorgan Chase & Co 5.16%
TSLA Tesla Inc 4.59%
WMT Walmart Inc 4.45%
NFLX Netflix Inc 3.77%
PLTR Palantir Technologies Inc 2.83%
COST Costco Wholesale Corp 2.59%
