Should Principal U.S. MegaCap ETF (USMC) Be on Your Investing Radar?
Style Box ETF report for USMC
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.
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.
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.
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%.
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.
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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
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