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Is Pacer US Small Cap Cash Cows 100 ETF (CALF) a Strong ETF Right Now?

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Launched on 06/16/2017, the Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

CALF is managed by Pacer Etfs, and this fund has amassed over $5.95 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Value. CALF seeks to match the performance of the Pacer US Small Cap Cash Cows Index before fees and expenses.

The Pacer US Small Cap Cash Cows Index uses an objective, rules-based methodology to provide exposure to small-capitalization U.S. companies with high free cash flow yields.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for CALF are 0.59%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.09%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 28.60% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Energy and Industrials round out the top three.

When you look at individual holdings, Par Pac Holdings Inc (PARR - Free Report) accounts for about 2.79% of the fund's total assets, followed by Consol Energy Inc New (CEIX - Free Report) and Sm Energy Co (SM - Free Report) .

The top 10 holdings account for about 24.4% of total assets under management.

Performance and Risk

Year-to-date, the Pacer US Small Cap Cash Cows 100 ETF has added roughly 31.88% so far, and was up about 30.67% over the last 12 months (as of 12/19/2023). CALF has traded between $35.29 and $47.44 in this past 52-week period.

The ETF has a beta of 1.23 and standard deviation of 25.87% for the trailing three-year period. With about 100 holdings, it effectively diversifies company-specific risk.

Alternatives

Pacer US Small Cap Cash Cows 100 ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 Value ETF (IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard Small-Cap Value ETF (VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $12.01 billion in assets, Vanguard Small-Cap Value ETF has $26.59 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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