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Is Principal Value ETF (PY) a Strong ETF Right Now?

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Launched on 03/21/2016, the Principal Value ETF (PY - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by Principal Funds. It has amassed assets over $276.48 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. PY seeks to match the performance of the NASDAQ U.S. Shareholder Yield Index before fees and expenses.

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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.96%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Representing 26.80% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Information Technology round out the top three.

Looking at individual holdings, Altria Group Inc Common Stock Usd.333 (MO - Free Report) accounts for about 3.25% of total assets, followed by Equitrans Midstream Corp Common Stock (ETRN - Free Report) and Prudential Financial Inc Common Stock Usd.01 (PRU - Free Report) .

PY's top 10 holdings account for about 21.68% of its total assets under management.

Performance and Risk

So far this year, PY has lost about -7.41%, and is down about -1.39% in the last one year (as of 05/23/2022). During this past 52-week period, the fund has traded between $40.50 and $45.34.

The ETF has a beta of 1.22 and standard deviation of 29% for the trailing three-year period. With about 117 holdings, it effectively diversifies company-specific risk.


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 $52.78 billion in assets, Vanguard Value ETF has $95.78 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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