Invesco S&P International Developed Momentum ETF

IDMO

Market cap $1.8B

The momentum factor is helping to propel strength in international equities. So defense spending, especially in Europe, could keep momentum on the side of the Invesco S&P International Developed Momentum ETF (IDMO).

iShares MSCI ACWI ex U.S. ETF is rated a buy as a stable, diversified core holding for global equity exposure outside the US. Invesco S&P International Developed Momentum ETF is also rated a buy but is best used as a tactical complement due to high turnover and sector concentration. IDMO offers superior risk-adjusted returns in bull markets but carries uncertainty from its momentum strategy and 115% annual portfolio turnover.

Investors enjoying the pairing of domestic stocks and the momentum factor are likely familiar with some related ETFs. This includes the Invesco S&P 500 Momentum ETF (SPMO).

To some, $1 billion of ETF net inflows is not what it used to be. The U.S. ETF industry has gathered more than $700 billion of net inflows this year and is likely to again break the $1 trillion mark.

After a year of strong returns, my analysis now signals it's time to sell the Invesco S&P International Developed Momentum ETF. IDMO underperforms the S&P 500 on both absolute and risk-adjusted returns, with a negative alpha and subpar risk-return metrics. While IDMO offers lower volatility and some diversification benefits, its risk-reward profile and information ratio are disappointing.

Invesco S&P International Developed Momentum ETF offers momentum exposure with a 0.25% expense ratio, suitable for tactical rather than core holdings due to high turnover. IDMO's portfolio, based on the S&P World Ex-U.S. Momentum Index, is growth-tilted and rebalanced semi-annually, leading to higher volatility in downturns. While the Fund may outperform in bull markets, its high turnover ratio and trading expenses could hinder long-term performance compared to more stable ETFs like VEA.

Invesco S&P International Developed Momentum ETF holds 183 international stocks with high momentum. The IDMO ETF is overweight in financials, quite heavy in Japan, and has fundamental growth characteristics. IDMO has outperformed other momentum ETFs in the same stock universe over the last seven years.

Invesco S&P International Developed Momentum ETF targets ex-U.S. and ex-Korea developed world equities that demonstrate robust momentum characteristics. In the current version, most of its net assets are allocated to Japanese stocks (54.7%). Denmark (9.9%) and the U.K. (6.6%) are in second and third places, respectively. IDMO solidly outperformed its peer IMTM as well as EFA in the past. However, it was unable to keep pace with IVV.

Last week was a busy one for ETFs, with nine new ETFs launching on the first day of the week alone. Calamos, Innovator, AllianzIM, Direxion, Global X and ProShares were among the issuers rolling out new funds.

Despite an uptick in activity during the prior week, last week in the wake of the Memorial Day holiday saw the debut of just five new ETFs and the completion of one closure.