Invesco Bloomberg Analyst Rating Improvers ETF

UPGD

Market cap $115M

Invesco Bloomberg Analyst Rating Improvers ETF earns a 'sell' rating due to a flawed selection process that excludes large/mid-cap stocks rated "buy" or better. Unfortunately, this impacts a substantial number of stocks. For example, the average Wall Street rating for Russell 1000 Index stocks is 3.91/5, while "sell" ratings are in the extreme minority. Consequently, UPGD is constrained to holding stocks rated somewhere between neutral and buy, and this "average" selection process is reflected in UPGD's poor results since its March 2024 strategy change.

Invesco Bloomberg Analyst Rating Improvers ETF tracks the Bloomberg ANR Improvers Index that includes 50 analysts' darlings. Despite the alluring strategy, UPGD's performance has been underwhelming, as it has delivered only a single-digit total return this year and trailed IVV since March 2024. Its AUM has been fluctuating around $100 million this year, indicating rather muted investor interest. So UPGD's liquidity is not particularly ample, which is another weakness.

Tracking the Bloomberg ANR Improvers Index, UPGD offers exposure to 50 analysts' darlings. This is a high-turnover strategy, and significant quarterly changes in the sector and factor mix should not come as a surprise. At this point, UPGD is heavy in industrials, IT, and consumer staples.

After the strategy change in March 2024, UPGD tracks the Bloomberg ANR Improvers Index. The idea to capitalize on equity research analysts' darlings is appealing, but returns are less so. UPGD has underperformed IVV since the index change, with December being especially challenging, and its contrarian equity mix is to blame.

The Invesco Bloomberg Analyst Rating Improvers ETF targets stocks with improving analyst ratings, aiming to capture potential market winners based on the Bloomberg ANR Improvers Index. The UPGD ETF updates its holdings quarterly, maintaining a diversified portfolio with significant allocations in Consumer Staples, Industrials, and Information Technology. Despite underperforming compared to the SPDR S&P 500 ETF, the fund's mid-cap focus and dynamic strategy offer unique exposure to analyst-upgraded stocks.

UPGD has seen a thorough recalibration earlier this year, with the underlying index replaced and its name changed. With a new strategy centered on "Bloomberg analyst rating improvers," UPGD has issues similar to its previous iteration. More specifically, the factor mix it is offering has a profound value tilt, while sufficient growth factor exposure is lacking, which is a disadvantage in the current environment.

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