The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Principal US Mega-Cap ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The longest-tenured manager is experienced, but other weaknesses limit the strategy to a Below Average People Pillar rating. The strategy gets an Average Process Pillar rating.  High volatility exposure is attributed to companies with a higher standard deviation of returns. And a low liquidity exposure is rooted in stocks with lower trading volumes, limiting managers' flexibility. 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

NVIDIA

Alphabet

Costco

Broadcom

Adobe

Mastercard

Amazon

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 US Mega-Cap ETF earns an Average Process Pillar rating. 

The most important driver of the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. The process is limited 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 beat 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.

 This strategy prefers larger market-cap firms compared with the average fund in its peer group, the Large Blend Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Looking at additional factor exposure, the managers have continually exhibited a willingness to take risks over the last few years, demonstrated by the portfolio's high volatility exposure. 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 recent months, the strategy was more exposed to the Volatility factor compared with its Morningstar Category peers as well. This strategy has also demonstrated an overweight liquidity risk tilt, evidenced by holding companies with relatively lower trading volumes than peers in these years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. Similarly, in recent months, the strategy also had less exposure to the Liquidity factor than peers. During the last few years, this strategy has also tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In this month, the strategy also had more exposure to the Quality 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 healthcare relative to the category average by 7.6 and 4.7 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and real estate, with industrials underweighting the average portfolio by 9.8 percentage points of assets and real estate similar to the average. The portfolio is positioned across 43 holdings and its assets are more dispersed than peers in the category. In particular, 43.7% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the typical peer's 48.8%. And finally, in terms of portfolio turnover, on a year-over-year basis, 29% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Principal US Mega-Cap 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 weakens 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, indicating that their risk-adjusted returns have been in line with the category average. Aaron J. Siebel has an experienced listed co-manager. Together, they average 14 years of listed portfolio management experience.

Below Average

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.

Parent

Principal U.S. Mega-Cap ETF

USMC is actively managed to offer exposure to the largest of the US large-cap segment. The fund uses a proprietary, quantitative model to construct the portfolio.

Principal U.S. Mega-Cap ETF is an actively managed fund that primarily invests in U.S. mega-cap companies. The USMC ETF's active, rules-based framework provides durability and stability during market volatility. The fund's heavy concentration in the technology sector could pose a risk if the sector underperforms.

USMC: Active Large Caps That Perform Like Passive

Principal U.S. Mega-Cap ETF (USMC) is an actively managed fund that invests in growth and value stocks of mega-cap companies within the top 50th percentile of the S&P 500 Index. USMC has a low expense ratio of 0.12 percent and has posted double-digit total returns over the past five years, despite a poor 2022. The fund is heavily focused on technology stocks, with over half of its assets invested in companies reliant on information and communication technology.

USMC: Low-Yielding Tech-Biased Portfolio Of Mega-Caps Generates Strong Returns

USMC selects stocks from the top 50th percentile by market value of the S&P 500, re-weighting the vast majority by a proprietary measure of financial strength. Fees are just 0.12%. Despite suggestions otherwise, USMC is not a low-volatility ETF by any stretch. Its 0.99 five-year beta and slightly lower standard deviation compared to SPY are our first clues.

USMC: Should You Buy This Low-Cost, Concentrated Mega-Cap ETF?

USMC offers a peculiar concentrated mix of mega-cap growth and value names with a tilt towards those that are less prone to frenetic price swings. This is a rare factor combination. There is one major downside. Names the fund selects for its portfolio are inherently overpriced, which is a perennial issue for the mega-cap league and especially for the IT sector.

USMC: An In-Between Vehicle

Is Principal U.S. MegaCap ETF (USMC) a Strong ETF Right Now?

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

Flexshares US Quality Low Volatility Index Fund

Invesco S&P 500 Minimum Variance ETF

A recession may happen. Lowering your portfolio's beta can protect the huge gains you've racked up since Q1 2020. A way to do this is with low volatility ETFs. I'll present all 28 that I track, but will highlight three high-quality choices that don't get a lot of coverage.

Worried About A Recession? Try These 3 Cheap Low-Volatility ETFs

With inflation concerns continuing to linger in the background, markets have pulled back slightly from their upward momentum with the CPI shock last week. This week brings the retail side into focus with big box retailers such as Walmart and Home Depot reporting their earnings in what should be a barometer of consumer sentiment.

Big Box Stores Set to Report Earnings This Week

The #1 trillion infrastructure bill that is currently circulating through Senate this week would be a boon for poor and isolated communities in terms of access to internet. $65 billion of the bill is allocated to improving internet access for communities that do not currently have reliable or high-speed internet, reports the Wall Street Journal.

Infrastructure Bill Would Expand Country's Internet Access

On Tuesday, the S&P and Nasdaq indices hit new record highs as mega-cap stocks pushed even higher, according to Reuters. The technology sector saw a 1.1% bump to hit a new peak, from which the tech-heavy Nasdaq benefited.

Boosted by Earnings Reports, S&P and Nasdaq Hit New Heights

Multi-factor exchange traded funds hit some rough spots earlier this year due to value exposure, but the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC) stands as an example of a multi-factor ETF that is primed outperform in the new year. USMC, which tries to reflect the performance of the Nasdaq US Mega Cap Select [.

Why the USMC Multi-Factor ETF Deserves Your Attention in 2021

While 2020 was a trying year for some investment factors, others were mediocre, and even more flourished, a scenario underscoring the utility of multi-factor strategies such as the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC). USMC, which tries to reflect the performance of the Nasdaq US Mega Cap Select Leaders Index, is comprised of companies [.

Mega-Caps with Mega Returns? The USMC ETF

Principal Healthcare Innovators Index ETF

Principal Spectrum Preferred Secs Active ETF

ETF Trends CEO Tom Lydon spoke with Ed Nini, Global Head of Product Strategy for Principal Global Investors, about the tumultuous year that has been 2020 and what kinds of strategies have been put into place with various advisors to account for it. Specifically, Lydon wanted to hear from Nini about the trends in portfolio [.

Principal on Trends in Portfolio Construction Amid 2020 Volatility

Factor timing is difficult, which adds to the case for using multi-factor exchange traded funds. One prominent example is the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC).

A Solid Multi-Factor Approach for a Fickle ETF Market

Investors looking to tap the benefits of multiple investment factors under the umbrella of a single fund may find the Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC) to their liking. USMC, which tries to reflect the performance of the Nasdaq US Mega Cap Select Leaders Index, is comprised of companies with the largest market [.

Here's a Strong Umbrella for Multiple Investment Factors

Vanguard Mega Cap Growth ETF

Stay-at-home orders, social distancing, and remote work have all fed into a funnel of opportunities in technology to help facilitate human interaction. As such, the tech-focused mega cap companies could continue to thrive well past the pandemic, especially the big names like Zoom and Amazon.

Mega Cap Companies Could Continue to Thrive Past the Pandemic

The Principal U.S. Mega-Cap Multi-Factor Index ETF (NasdaqGM: USMC), as its name implies, is a multi-factor exchange, but as a home to some of most well-known domestic mega-cap stocks, the fund offers investors some worthy exposure to the quality factor.

An Indirect, But Credible Quality Idea With This Multi-Factor ETF

Tech giants like Facebook, Apple, Google, Microsoft, and Amazon have thrived during the Covid-19 pandemic as individuals and businesses are utilizing more technology in order to adjust to the new normal. Even as economies start to reopen, it should be a seamless transition for these tech giants, which should duly benefit mega cap-focused exchange-traded funds [.

Capitalize on Further Strength in Megacaps with This ETF

As investors look for ways to better navigate the current markets, one may consider smart beta or multi-factor exchange traded fund strategies designed to help enhance and diversify an investment portfolio.

A Multi-Factor ETF Strategy to Participate in Today’s Market

ETF Trends CEO Tom Lydon discussed the Principal U.S. Mega-Cap Multi-Factor Index ETF (USMC) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

ETF of the Week: Principal U.S. Mega-Cap Multi-Factor Index ETF (USMC)

As investors look back into stocks, one may consider a de-risking ETF strategy that allows you to participate in the broad equity market and mitigate any further potential drawdowns.

A Way to Better Manage Equity Risk with a Low-Volatility ETF

Principal Exchange-Traded Funds - Principal International Multi-Factor Core Index ETF

Principal Exchange-Traded Funds - Principal U.S. Large-Cap Multi-Factor Core Index ETF

Principal Exchange-Traded Funds - Principal U.S. Small-MidCap Multi-Factor Core Index ETF

One timely way to de-risk client portfolios is by allocating U.S. equity investments to lower volatility companies.

De-Risk U.S. Equities with a Unique Low-Volatility Approach

iSh Russell1000 Shs

iShares Core Dividend Growth ETF

Vanguard Dividend Appreciation ETF

Health Care Select Sector SPDR Fund

JPMorgan Chase believes that the stock selloff is overdone. One can buy beaten-down ETFs with strong Zacks ranks, benchmark-beating yields and beta less than one.

Is the Virus-Induced Stock Selloff Overdone? ETFs to Buy Now

Prncpl SusMmnt Shs

Principal U.S. Small-Cap Multi-Factor Index ETF

Principal Quality ETF

Putnam Focused Large Cap Value ETF

Principal Value ETF

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 [.

Factors to Consider When Looking Into Smart Beta ETFs

Trns DS S&P 500 Shs

WisdomTree U.S. Earnings 500 Fund

iShares Core S&P 500 ETF

Portfolio+ S&P 500 ETF

Invesco S&P 500 Equal Weight ETF

Arrow Reverse Cap 500 ETF

ProShares UltraShort S&P500

Barclays Bank iPath Long Extended Exchange Traded Notes 2010-30.11.20 Series -A- Linked to S&P 500 TR   Index

ProShares Short S&P500

Direxion Daily S&P 500 Bear 1X Shares

Direxion Daily S&P 500 Bull 2x Shares

ProShares S&P 500 ex-Energy ETF

Direxion Daily S&P 500 Bull 3x Shares

ProShares S&P 500 Ex-Financials ETF

Direxion Daily S&P 500 Bear 3x Shares

ProShares S&P 500 Ex-Technology ETF

ProShares UltraPro Short S&P500

ProShares S&P 500 ex-Health Care ETF

SPDR S&P 500 ETF Trust

ProShares Ultra S&P 500

ProShares UltraPro S&P500

Vanguard S&P 500 ETF

EPS growth estimates are relatively low, meaning the PE multiple must expand for the S&P to reach consensus price targets.

News for Principal U.S. Mega-Cap ETF ETF (USMC)