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Is Pacer US Cash Cows 100 ETF (COWZ) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Pacer US Cash Cows 100 ETF (COWZ - Free Report) is a smart beta exchange traded fund launched on 12/16/2016.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Pacer Etfs. It has amassed assets over $19.63 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the Pacer US Cash Cows 100 Index.

The Pacer US Cash Cows 100 Index uses an objective, rules-based methodology to provide exposure to large and mid-capitalization U.S. companies with high free cash flow yields.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for COWZ are 0.49%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.90%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

For COWZ, it has heaviest allocation in the Energy sector --about 29.90% of the portfolio --while Consumer Discretionary and Healthcare round out the top three.

Taking into account individual holdings, Lennar Corp (LEN - Free Report) accounts for about 2.52% of the fund's total assets, followed by Cvs Health Corp (CVS - Free Report) and Phillips 66 (PSX - Free Report) .

The top 10 holdings account for about 21.35% of total assets under management.

Performance and Risk

The ETF has added about 0.98% so far this year and it's up approximately 10.38% in the last one year (as of 02/21/2024). In the past 52-week period, it has traded between $44.32 and $53.19.

The fund has a beta of 1.05 and standard deviation of 19.20% for the trailing three-year period. With about 101 holdings, it effectively diversifies company-specific risk.

Alternatives

Pacer US Cash Cows 100 ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $53.10 billion in assets, Vanguard Value ETF has $108.65 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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