Weakness in Principal Value ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy earns a Below 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 volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy's longest-tenured manager is experienced, but other weaknesses earn it a Below Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Microsoft

Apple

Broadcom

Exxon Mobil

Home Depot

QUALCOMM

Bank of America

Chevron

Linde

Caterpillar

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. Principal Value ETF earns a Below Average Process Pillar rating. 

The process is bolstered by the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. However, the rating is weakened by the parent firm's five-year risk-adjusted success ratio of 52%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.1 stars, also holds the process back. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy tends to pick smaller market-cap firms compared with the average fund in its peer group, the Large Value Morningstar Category.  But in terms of style (value/growth) exposure, it is similar. Analyzing additional factors, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. 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 an overweight bias to the volatility factor over these years, meaning it has owned companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield 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 technology and industrials relative to the category average by 6.7 and 6.1 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and utilities, underweight the average by 9.1 and 4.8 percentage points of assets, respectively. The strategy owns 115 securities and its assets are more dispersed than peers in the category. In particular, 20.1% of the strategy's assets are concentrated in the top 10 fund holdings, compared to the typical peer's 27.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 2% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

Principal Value ETF earns a Below Average People Pillar rating. The team is bolstered by the portfolio managers' outperformance of peers at the funds they run, as measured by their combined three-year manager excess returns. The turnover of its management team limits the team. The fund last saw a manager change six months ago.


The strategy is backed by Aaron J. Siebel, the longest-tenured manager, who has been a listed portfolio manager for five years. The average Morningstar Rating of the strategies they currently manage is 3.2 stars, demonstrating average risk-adjusted performance. Despite having a small team, the two listed managers boast 14 years of listed portfolio management experience.

People

Principal Asset Management follows client demand around the world and across asset classes. While the firm’s sensitivity to market trend can help better serve clients, its sprawling efforts have also led to mixed results. Its Parent rating remains Average.

The firm relies on multiple investment boutiques and teams to drive investment results, some of which have established solid records. Aligned Investors and Edge Asset Management run strategies that Morningstar analysts regard highly, and the real estate team also enjoys high ratings. While benefiting from Principal’s sales and operational support, these small teams invest and develop new strategies independently. On the other hand, Principal’s core fixed income and equity teams are less inspiring, and many of the actively managed exchange-traded funds launched recently by these teams have already been liquidated.

Principal continues to take steps to keep up with the competition, though execution risk exists amid all these efforts. It reorganized its data science team after a leadership departure with the goal of it work more closely with the firm’s investment teams. Principal has also been proactive in adding personnel and operational resources in its drive to build up its multi-asset solution and its liability-driven investing capabilities, and the firm continues to leverage its global presence to enter emerging markets.

Average

Parent

Principal Value ETF

PY utilizes a proprietary quantitative model to actively invest in large- and mid-cap companies that exhibit higher degrees of shareholder yield.

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This has been a terrible year for global markets. Hence, dividend ETFs have remained in vogue and would likely to be stars in 2023 as well.

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Given the bullish fundamentals, the dips might charge up investors to snap up ETFs on the cheap for outsized gains in the coming weeks.

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These dividend ETFs outperformed the S&P 500 in the first half of 2021.

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Sometimes, prosaic approaches to factor investing leave investors wanting more. That's long been the case with value stocks, but the Principal Value ETF (PY) provides a unique lens to value, one that could serve investors if the recent rebound by the factor is persistent.

Why Principal's Value Principle Is Geared for Gains

Value stocks are perking up and that augurs well for advisors and investors mulling a return to the once beloved factor. It's also a good time to consider fresher approaches to value investing, such as the Principal Value ETF (PY).

Don't Miss Out as Value ETFs Make Their Move

Momentum is building for value stock resurgence, but investors looking to capitalize may want to go beyond prosaic exchange traded funds. Enter the Principal Value ETF (PY).

Timing Out a Recovery for Value Stocks and Related ETFs

Investors seeking a different approach to shareholder rewards and generating income should consider the Principal Shareholder Yield Index ETF (PY) and the time is right to do just that. PY seeks to provide investment results that closely correspond to the performance of the Nasdaq US Shareholder Yield Index.

A Fine Time to Embrace Merits of Shareholder Yield

Many investors simply monitor yield view bonds or common stocks, but a more encompassing solution is shareholder yield, which can be sourced via the Principal Shareholder Yield Index ETF (PY). PY seeks to provide investment results that closely correspond to the performance of the Nasdaq US Shareholder Yield Index.

Examining the Potency of Shareholder Yield in a Low-Yield World

With interest rates residing around historic lows, it’s easy to be tempted high dividend stocks and ETFs, but in news that may catch some investors by surprise, shareholder yield is proving to be a better than high-yield equity this year. Just look at the Principal Shareholder Yield Index ETF (PY).

Shareholder Yield Proving Stronger Than High Yield for Equity Investors

There’s often a debate between the efficacy of buybacks and dividends, but some ETFs, such as the Principal Shareholder Yield Index ETF (PY), ensure investors don’t have to isolate just one of those specific concepts.

Explore the Virtues of Shareholder Yield With This ETF

Some ETFs focus on dividends while others emphasize buybacks, the two primary forms of shareholder rewards. The combination of the two results in the concept known as a shareholder, which is the emphasis of the Principal Shareholder Yield Index ETF (PY).

Size Up Shareholder Yield With This ETF

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As investors consider incorporating smart beta exchange traded funds into a diversified investment portfolio, it is important to look at foundational concepts and the innovative approaches to make a more informed decision in factor allocation. On the recent webcast, Factor Investing 101: An Actionable Guide for Every Investor, Matthew Cohen, Senior ETF Specialist, Principal Global [.

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