A smart beta exchange traded fund, the Pacer US Cash Cows 100 ETF (COWZ) debuted on 12/16/2016, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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 $25.03 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the Pacer US Cash Cows 100 Index before fees and expenses.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.49%.
The fund has a 12-month trailing dividend yield of 1.82%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
COWZ's heaviest allocation is in the Information Technology sector, which is about 21.10% of the portfolio. Its Consumer Discretionary and Energy round out the top three.
Looking at individual holdings, Conocophillips (COP) accounts for about 3.27% of total assets, followed by Expedia Group Inc (EXPE) and Hewlett Packard Enterprise Co (HPE).
COWZ's top 10 holdings account for about 22.43% of its total assets under management.
Performance and Risk
The ETF return is roughly 0.18% and was up about 10.22% so far this year and in the past one year (as of 01/03/2025), respectively. COWZ has traded between $50.77 and $61.35 during this last 52-week period.
The fund has a beta of 1.02 and standard deviation of 18.66% 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.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $65.34 billion in assets, Vanguard Value ETF has $126.31 billion. SCHD has an expense ratio of 0.06% 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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Pacer US Cash Cows 100 ETF (COWZ): ETF Research Reports
ConocoPhillips (COP) : Free Stock Analysis Report
Expedia Group, Inc. (EXPE) : Free Stock Analysis Report
Hewlett Packard Enterprise Company (HPE) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports
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