This Relatively Unknown ETF Is Beating The Market

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Sometimes we need a little extra diversification in our portfolios.

And sometimes, it can be worthwhile to go pretty far outside the box.

When we looked at what financial pros did, apparently, they’re really big into bovines.

But not the one you assume.

The Pacer US Cash Cows 100 ETF (COWZ).

Now you are probably wondering, why.

The latest CPI numbers spooked the stock market, as it experienced its worst single-day drop in nearly two years. 

Threats of an economic recession are back on the table now that inflation is rising again. While the Fed will do everything possible to slow it down, many companies have reduced their workforce and lowered profit expectations. 

Companies with strong financials will weather the storm best. 

But instead of trying to find them yourself, there’s an ETF that’s done it for you. 

The Pacer Cash Cows 100 ETF (COWS) invests in stocks with a high free cash flow yield, and it outperformed the S&P 500 over the last five years. 

Check out our analysis below…

Pacer Cash Cows 100 ETF (COWZ) aims to provide capital appreciation over time by screening the Russell 1000 for the top 100 companies based on free cash flow yield. 

The ability to generate a high free cash flow yield implies that a firm produces more than enough cash to satisfy its business needs and can invest in growth opportunities. 

The three components the COWZ ETF looks for are:

1. High Quality US Large-Cap Companies
2. Companies Trading At A Relevant Discount
3. Long-Term Capital Appreciation

COWZ is a weighted ETF investing in 100 companies.

Here are more details about the companies in the COWZ portfolio:

• Weighted Average Market Cap $60.4 billion
• Dividend Yield 1.76%
• Free Cash Flow Yield 12.79%
• Price/Earnings 7.08x

COWZ invests in many different sectors. Here is the breakdown of the portfolio:

Here are the top ten holdings in the portfolio:

COWZ has been around since 2016. 

If you invested $10,000 in the ETF five years ago, it would be worth over $18,500 today, or 85%. It is down a little less than 5% year-to-date. 

It has outperformed the SPDR S&P 500 ETF (SPY) over the last five years, as that has returned 72%. 

Trading COWZ

COWZ is an actively traded ETF, averaging more than 1.5 million shares daily. Furthermore, it’s optionable. 

Investing In COWZ

The ETF is reconstituted and rebalanced quarterly. 

It charges an expense ratio of 0.49%, which is competitive in the ETF space. 

In addition, it also pays an annual dividend to investors, which currently stands at $0.79, or a yield of 1.76%. 

Alternatives To COWZ

Some alternatives to COWZ include the Vanguard Value ETF (VTV), iShares Russell 1000 Value ETF (IWD), and Vanguard High Dividend Yield Index ETF (VYM). 

VTV charges an expense ratio of 0.04%, which is relatively low. It pays investors an annual dividend of $3.22, or a yield of 2.38%, is down 8% year-to-date, but is up approximately 57% over the last five years. There are 344 companies in the portfolio, mainly consisting of large-cap value stocks. 

IWD charges an expense ratio of 0.18%. It pays investors an annual dividend of $2.77, or a yield of 1.84%, is down 10.4% year-to-date, but is up approximately 43% over the last five years. There are 857 companies in the portfolio, mainly consisting of large-and-mid-cap value stocks.

VYM charges an expense ratio of 0.06%. It pays investors an annual dividend of $3.09, or a yield of 2.96%, is down 7.1% year-to-date, but is up approximately 56% over the last five years. There are 443 stocks in the portfolio, mainly large-cap value stocks.

Our Opinion 8/10

With inflation running wild and threats of an economic recession looming, fundamentals matter more than ever. COWZ has not only outperformed the overall market this year, but it has also been doing it for the last five years. The bottom line, this is an excellent ETF with a great track record. We believe it deserves a spot in any investor’s portfolio.