Gain Exposure to Entertainment Stocks with This Fund

(Note: Second in a series of ETF Talks on the Millennial generation).

The Invesco Dynamic Leisure and Entertainment ETF (PEJ) tracks a multifactor, tiered equal-weighted index of U.S. entertainment and leisure industry stocks.

The exchanged-traded fund (ETF) is based on the Dynamic Leisure & Entertainment Intellidex Index. PEJ normally will invest at least 90% of its total assets in common stocks that comprise the Index.

The Intellidex Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment criteria that include price momentum, earnings momentum, quality, management action and value. The underlying Index is comprised of common stocks of 30 U.S. leisure and entertainment companies.

These companies are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries. The fund and the Index are rebalanced and reconstituted quarterly in February, May, August and November.

PEJ aims to pick winning stocks rather than deliver a market-cap-weighted basket that reflects the industry. Its stock selection process is a bit opaque beyond the broad descriptions of its screens: fundamental, timeliness, valuation and risk. Some might see value in this diversification, which mitigates single-stock risk, while others might see a lack of focus. In terms of firm size, the fund strays significantly away from large-caps.

The fund’s top sectors and their weighting in its portfolio include Restaurants & Bars, 41.26%; Airlines, 21.50%; Leisure and Recreation, 12.49%; Hotels, Motels & Cruises, 8.47%; and Food Retail & Distribution, 5.64%.

PEJ’s top holdings are United Airlines Holdings, Inc. (NASDAQ:UAL); Booking Holdings, Inc. (NASDAQ:BKNG); Delta Air Lines, Inc. (NYSE:DAL); Yum China Holdings, Inc. (NYSE:YUMC); and Chipotle Mexican Grill, Inc. (NYSE:CMG).

Chart courtesy of StockCharts.com

Up 5.85% year to date, PEJ has done well to weather the many market corrections in 2019. It has 31 holdings, an average spread of 0.13% and an expense ratio of 0.63%, meaning it is relatively expensive to hold compared to other exchange-traded funds.

PEJ provides investors with exposure to Leisure and Entertainment stocks but their performance can be cyclical and based on economic strength. As always, please conduct your own due diligence, as you would with any investment, before deciding whether this fund fits your own individual portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.