Exchange-traded funds (ETFs) by Pacer have become popular among value investors. In addition to their unique names, some of these funds are highly uncorrelated to the broader market. This article compares the US Cash Cows Growth ETF (BUL), US Small Cap Cash Cows 100 ETF (CALF), and the US Cash Cows 100 ETF (COWZ).
Pacer US Cash Cows ETF (COWZ)
The COWZ ETF is one of the biggest value-focused exchange funds with almost $24 billion in assets. It is a fund focusing on American companies with a long track record of growing their free cash flow.
Its portfolio creation follows a unique path, where it starts with the Russell 1000 companies. It then sorts these names in terms of their free cash flow, which is ranked by the trailing twelve-month (TTM) period. The company then selects 100 firms that have the highest TTM fre cash flow yield.
COWZ has 100 companies, most of them in the energy segment. They are followed by healthcare, consumer discretionary, technology, and consumer staples. The top companies in the fund are ConocoPhillips, Marathon Petroleum, Exxon, Chevron, and Ford Motor,
Pacer US SMALL Cap Cash Cows 100 ETF (CALF)
CALF is a similar fund to COWZ, with the only difference being that it focuses on small companies. Whereas the COWZ fund starts its screening on the Russell 1000 index, CALF starts by screening the S&P SmallCap 600 companies. It initially ranks these firms by their free cash flow yield and then selects the top 100 firms.
CALF’s constituent companies are mostly in the consumer discretionary sector, and are then followed by technology, industrials, energy, and healthcare. The fund’s biggest names are United Airlines, Expedia, Ovintiv, Flex, CF Industries, and Jazz Pharmaceuticals.
Read more: 4 great SWAN ETFs: RWL, SCHD, DGRO, COWZ
Pacer US Cash Cows Growth ETF (BUL)
The BUL ETF, on the other hand, also focuses on free cash flow. It works like COWZ and CALF, with the only difference being that it focuses on growth companies in the US. It screens the top 100 companies in the S&P 900 Pure Growth Index and then looks at the top 50 of them.
31% of these companies are in the consumer discretionary segment, while 29% ae in the industrials sector. The other companies are in the technology, healthcare, and consumer staples. Some of the top companies in the fund are Uber, Airbnb, Booking, Salesforce, Caterpillar, and IBM.
COWZ vs. CALF vs BUL: better buy?
As described above, these funds are largely similar, with the only difference being the underlying index being screened. The other difference is their cost or expense ratio. COWZ is the most affordable with its expense ratio of 0.49%. CALF has an expense ratio of 0.59%, while BUL charges 0.60%.
Analysts recommend investing in low-cost funds because these fees add up over time. For example, a $100,000 invested in COWZ will cost $490 a year and $4900 in ten years, excluding the compounding effect. A similar amount invested in BUL will cost $600 and $6,000 in the same period.
One should only consider investing in an expensive ETF if it has better returns. A closer look shows that COWZ has a total return of minus 1.20% this year, while CALF and BUL have dropped by 11.46% in the same period.
COWZ has returned 16.5% in the last three years, while CALF has dropped 2.0%, and BUL has jumped by 18%. As shown above, the COWZ ETF returned 192% in the last five years, compared to CALF’s and BUL’s 157%.
Therefore, historical performance shows that COWZ is a slightly better fund to invest in than CALF and BUL. It also beat the S&P 500 index in the same period. The CALF ETF, on the other hand, has been the worst performer in this period.
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