2024-05-28 07:28:30 ET
Summary
- Principal U.S. Mega-Cap ETF provides concentrated, actively managed exposure to a select number of U.S. mega-caps. Fees are low at 0.12%, and the ETF has $2.35 billion in assets under management.
- Unlike market-cap-weighted alternatives like XLG, USMC assigns substantially different weights to its 42 holdings. Magnificent Seven exposure is 33% compared to 53% for XLG.
- The fund's prospectus indicates managers assign greater weight to stocks expected to be less volatile, but my analysis found little evidence this was the case. USMC's five-year beta is 1.03.
- I also found that despite USMC's high concentration, its growth and value features were no better than SPY's. As a result, I don't find it a compelling buy, and recommend readers pass on USMC.
Investment Thesis
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USMC: Why This Top Quality Mega-Cap ETF Disappoints