Pacer US Small Cap Cash Cows 100 ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The strategy’s management team earns an Average People Pillar rating. The People Pillar rating is indirectly assigned by an analyst rather than algorithmically derived. Please see the notes following pillar section for more details. The strategy's parent organization is industry standard, albeit with some strong attributes like overall attractive fees and a commendable risk-adjusted track record. This earns the firm an Average Parent Pillar rating.

Analyst Rating

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Meritage Homes

Boise Cascade

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Pacer US Small Cap Cash Cows 100 ETF earns an Above Average Process Pillar rating. 

The main driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the experience of the management team, which averages five years at this fund.

 This strategy, over time, has opted for smaller market-cap companies, compared with others in the Small Value Morningstar Category.  But in terms of style (value/growth) exposure, it is similar. Analyzing additional factors, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in consumer cyclical and energy relative to the category average by 22.4 and 5.9 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and real estate, underweight the average by 22.5 and 6.6 percentage points of assets, respectively. The portfolio is positioned across 102 holdings and its assets are more dispersed than peers in the category. In particular, 20.8% of the fund’s assets are concentrated in the top 10 fund holdings, compared to the category’s 27.7% average. And in closing, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.

Above Average

Process

Pacer’s team is good but unexceptional, earning the strategy an Average People Pillar rating. There are two managers listed on the fund: Bruce Kavanaugh, Danke Wang. Together, they manage a total of 26 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Average

People

In a competitive industry, Pacer doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of Pacer is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the second-cheapest quintile of category peers. Pacer's risk-adjusted performance compares similarly to competitors. Across its open-end and exchange-traded funds, the firm’s average five-year Morningstar Rating is 3.6 stars, which is about standard. A cause for concern at Pacer are its relatively inexperienced longest-tenured managers. In particular, average tenure across portfolio managers is only four years, which contributes negatively to its rating.

Parent

Pacer US Small Cap Cash Cows 100 ETF

CALF tracks an index of 100 companies out of the S&P Small Cap 600 Index selected and weighted by free cash flow.

For investors seeking momentum, Pacer US Small Cap Cash Cows 100 ETF CALF is probably on radar. The fund just hit a 52-week high and is up 27.92% from its 52-week low price of $35.28/share.

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The Pacer US Small Cap Cash Cows 100 ETF (CALF) was launched on 06/16/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Value category of the market.

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The Pacer US Small Cap Cash Cows 100 ETF focuses on small-cap companies with high free cash flow yield, offering growth potential with reduced risks. Small-cap stocks often offer higher potential returns but come with higher risks; the CALF ETF helps investors balance risk and return through cash flow. CALF has outperformed small-cap passive averages and kept up with large caps, making it a notable option in the small-cap space.

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Warren Buffett's favorite valuation metric is free cash flow yield, specifically free cash flow/enterprise value. This is the best valuation metric of the last 33 years, generating 16% average annual returns compared to 12% for the S&P and 9.5% for the Russell 1000. Pacer US Cash Cows 100 ETF has been the top-performing ETF using this strategy. There are many challenges to the Buffett-style deep value ETF crown, including from Pacer itself.

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MALVERN, Pa.--(BUSINESS WIRE)--Pacer ETFs Surpasses $25B Milestone in Assets Under Management.

Pacer ETFs Surpasses $25B Milestone in Assets Under Management

VettaFi's vice chairman Tom Lydon discussed the Pacer US Small Cap Cash Cows 100 ETF (CALF) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” For more news, information, and analysis, visit VettaFi | ETF Trends.

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CALF is a free-cash-flow-focused fund providing exposure to 100 small-cap stocks. The ETF has $2.14 billion in assets under management and a 0.59% expense ratio. CALF has the best profitability score out of any small-cap fund I've encountered. Its free-cash-flow-yield screen drives down valuations and overall, it's a better choice than plain-vanilla ETFs.

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MALVERN, Pa.--( BUSINESS WIRE )--Pacer ETFs celebrates an incredible year of growth driven by its suite of strategy-driven, rules-based ETFs, capped off by the outstanding achievement of reaching $19.6 billion in assets as of Dec. 30, 2022. After starting 2022 with $10.2 billion in AUM, Pacer achieved a 92.2% growth rate, nearly doubling its assets. Within the first week of the New Year, Pacer surpassed $20 billion in assets signaling a strong start for 2023.

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Exchange traded fund investors should consider the benefits of cash cow stocks and how they can enhance their investment portfolios.

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Cash cow companies provide consistent cash flows and can help strengthen core investment allocations. In the upcoming webcast, Cash Cows: A Simple Pacer ETFs Strategy for Complex Markets, Sean O'Hara, president of Pacer ETFs Distributors, will highlight the benefits of cash cow stocks and how they can enhance financial advisors' client portfolios.

News for Pacer US Small Cap Cash Cows 100 ETF ETF (CALF)