Full access to Entrepreneur for $5
Subscribe

Should Principal U.S. MegaCap ETF (USMC) Be on Your Investing Radar?

Style Box ETF report for USMC

By
This story originally appeared on Zacks

Designed to provide broad exposure to the Large Cap Blend segment of the US equity market, the Principal U.S. MegaCap ETF (USMC) is a passively managed exchange traded fund launched on 10/12/2017.

- Zacks

The fund is sponsored by Principal Funds. It has amassed assets over $2.06 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.

Why Large Cap Blend

Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.12%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.40%.

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.

This ETF has heaviest allocation to the Information Technology sector--about 30.60% of the portfolio. Healthcare and Telecom round out the top three.

Looking at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 5.87% of total assets, followed by Berkshire Hathaway Inc Cl B Common Stock Usd.0033 (BRK.B) and Pfizer Inc Common Stock Usd.05 (PFE).

The top 10 holdings account for about 32.76% of total assets under management.

Performance and Risk

USMC seeks to match the performance of the Nasdaq US Mega Cap Select Leaders Index before fees and expenses. The Nasdaq U.S. Mega Cap Select Leaders Index uses a quantitative model designed to identify equity securities of companies with the largest market capitalizations in the Nasdaq US 500 Large Cap Index, with higher weights given to securities that are less volatile.

The ETF has added about 19.07% so far this year and it's up approximately 27.81% in the last one year (as of 09/10/2021). In the past 52-week period, it has traded between $31.45 and $42.12.

The ETF has a beta of 0.90 and standard deviation of 21.44% for the trailing three-year period. With about 48 holdings, it has more concentrated exposure than peers.

Alternatives

Principal U.S. MegaCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, USMC is a good option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P 500 ETF (IVV) and the SPDR S&P 500 ETF (SPY) track a similar index. While iShares Core S&P 500 ETF has $304.81 billion in assets, SPDR S&P 500 ETF has $400.57 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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.



Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.

Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly. 

See 3 crypto-related stocks now >>



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 

Principal U.S. MegaCap ETF (USMC): ETF Research Reports

 

Apple Inc. (AAPL): Free Stock Analysis Report

 

Pfizer Inc. (PFE): Free Stock Analysis Report

 

Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report

 

SPDR S&P 500 ETF (SPY): ETF Research Reports

 

iShares Core S&P 500 ETF (IVV): ETF Research Reports

 

To read this article on Zacks.com click here.