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Is Principal Value ETF (PY) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Principal Value ETF (PY - Free Report) debuted on 03/21/2016, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Principal Funds, PY has amassed assets over $207.36 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ U.S. Shareholder Yield Index.
The NASDAQ U.S. Shareholder Yield Index provides exposure to equity securities of mid- and large-capitalization U.S. issuers. The index focuses on U.S. companies with sustainable shareholder yield, strong cash flow generation, and capacity to increase dividends and buybacks.
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.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.15%.
The fund has a 12-month trailing dividend yield of 2.85%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PY, it has heaviest allocation in the Financials sector --about 27.50% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Equitrans Midstream Corp Common Stock (ETRN - Free Report) accounts for about 4.08% of total assets, followed by Altria Group Inc Common Stock Usd.333 (MO - Free Report) and Prudential Financial Inc Common Stock Usd.01 (PRU - Free Report) .
PY's top 10 holdings account for about 22.61% of its total assets under management.
Performance and Risk
The ETF has lost about -0.85% so far this year and is up about 13.02% in the last one year (as of 03/23/2022). In the past 52-week period, it has traded between $39.28 and $45.34.
The fund has a beta of 1.26 and standard deviation of 28.63% for the trailing three-year period. With about 116 holdings, it effectively diversifies company-specific risk.
Alternatives
Principal Value ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
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 $58.46 billion in assets, Vanguard Value ETF has $102.01 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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Is Principal Value ETF (PY) a Strong ETF Right Now?
A smart beta exchange traded fund, the Principal Value ETF (PY - Free Report) debuted on 03/21/2016, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Principal Funds, PY has amassed assets over $207.36 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ U.S. Shareholder Yield Index.
The NASDAQ U.S. Shareholder Yield Index provides exposure to equity securities of mid- and large-capitalization U.S. issuers. The index focuses on U.S. companies with sustainable shareholder yield, strong cash flow generation, and capacity to increase dividends and buybacks.
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.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.15%.
The fund has a 12-month trailing dividend yield of 2.85%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PY, it has heaviest allocation in the Financials sector --about 27.50% of the portfolio --while Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Equitrans Midstream Corp Common Stock (ETRN - Free Report) accounts for about 4.08% of total assets, followed by Altria Group Inc Common Stock Usd.333 (MO - Free Report) and Prudential Financial Inc Common Stock Usd.01 (PRU - Free Report) .
PY's top 10 holdings account for about 22.61% of its total assets under management.
Performance and Risk
The ETF has lost about -0.85% so far this year and is up about 13.02% in the last one year (as of 03/23/2022). In the past 52-week period, it has traded between $39.28 and $45.34.
The fund has a beta of 1.26 and standard deviation of 28.63% for the trailing three-year period. With about 116 holdings, it effectively diversifies company-specific risk.
Alternatives
Principal Value ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
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 $58.46 billion in assets, Vanguard Value ETF has $102.01 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.