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

ETF Principal U.S. Mega-Cap ETF Summary

Profile:

Principal U.S. Mega-Cap ETF (MEGA) is a passively managed exchange-traded fund that tracks the performance of the Nasdaq US Mega Cap 125 Index. The ETF primarily invests in large-cap US stocks, focusing on companies with a market capitalization exceeding $100 billion. MEGA offers investors diversified exposure to the top 125 publicly traded US companies, spanning various industries such as technology, healthcare, consumer goods, and financials.

Objective:

MEGA's primary objective is to track the performance of the Nasdaq US Mega Cap 125 Index and provide investors with a cost-efficient way to gain exposure to the large-cap segment of the US stock market.

Issuer:

MEGA is issued by Principal Global Investors, a subsidiary of Principal Financial Group. Principal Financial Group is a diversified global financial services firm with a long history of serving individuals, families, and businesses worldwide.

Reputation and Reliability:

Principal Financial Group has a long-standing reputation in the financial industry and is considered reliable with a solid track record of managing various financial products and services.

Management:

The ETF is managed by a team of experienced investment professionals at Principal Global Investors, who have extensive experience in managing passive index funds and analyzing the large-cap US equity market.

Market Share:

MEGA is a relatively new ETF launched in October 2022 and currently holds a small market share in its sector. However, considering the issuer's reputation and the growing demand for large-cap exposure, MEGA has the potential to attract further investor interest.

Total Net Assets:

As of November 21, 2023, MEGA has approximately $75.0 million in total net assets.

Moat:

MEGA offers several competitive advantages:

• Low Fees: With an expense ratio of 0.14%, MEGA is a cost-effective ETF offering exposure to large-cap US companies.
• Passive Management: By passively tracking a well-established index, MEGA avoids the higher cost and complexity associated with active management.
• Diversification: By investing in 125 large-cap companies across various industries, MEGA mitigates sector-specific risks and strengthens portfolio diversification.

Financial Performance:

Since its inception in October 2022, MEGA has delivered a 7% total return. Its performance is closely aligned with the Nasdaq US Mega Cap 125 Index, indicating its effectiveness in tracking its benchmark.

Growth Trajectory:

The US mega-cap technology and healthcare sectors have witnessed significant growth in recent years. This trend, coupled with increasing demand for passive index-tracking ETFs, suggests positive long-term growth prospects for MEGA.

Liquidity:

MEGA exhibits strong liquidity with an average trading volume of over 650,000 shares daily. Its tight bid-ask spread also ensures low transaction costs for investors.

Market Dynamics:

Factors affecting MEGA's market environment include US economic growth, inflation rates, interest rate decisions by the Federal Reserve, and performance of large-cap US companies, particularly in technology and healthcare sectors.

Competitors:

MEGA's primary competitors include:

• Invesco QQQ Trust (QQQ): ETF tracking the Nasdaq-100 Index, with $71 billion in AUM and 0.20% expense ratio.
• iShares Core S&P 500 (IVV): ETF tracking the S&P 500 Index, with $555 billion in AUM and 0.03% expense ratio.
• Vanguard Mega Cap Value ETF (MGV): ETF tracking a value-weighted index of mega-cap stocks, with $51 billion in AUM and 0.06% expense ratio.

Expense Ratio:

MEGA has a low expense ratio of 0.14%, encompassing management and other operating fees.

Investment Approach and Strategy:

MEGA employs a passive management strategy seeking to replicate the performance of the Nasdaq US Mega Cap 125 Index. Its portfolio comprises large-cap US stocks in sectors like technology, healthcare, consumer staples, and financials.

Key Points:

• Diversification through exposure to 125 US mega-cap stocks.
• Passive management ensuring low expenses.
• Strong track record of aligning with benchmark returns.
• Relatively low market share offering opportunities for future growth.
• Accessible investment for exposure to leading US companies.

Risks:

Investing in MEGA involves certain risks:

• Market Volatility: Like all stock-based investments, MEGA is susceptible to market fluctuations.
• Interest Rate Risk: Rising interest rates could impact the performance of large-cap companies.
• Technology and Healthcare Sector Dependence: MEGA's focus on technology and healthcare renders it vulnerable to sector-specific developments and performance risks.

Who Should Consider Investing:

MEGA could be suitable for investors who:

• Seek diversification with exposure to major US companies.
• Prioritize a passive investing approach with low costs.
• Aim for long-term capital appreciation.
• Have a moderate to high-risk appetite.

Fundamental Rating Based on AI: 7.5 out of 10

MEGA presents a compelling proposition with solid fundamentals, offering a diversified, cost-efficient portfolio of leading US mega-cap companies. It has exhibited good alignment with benchmark performance and demonstrates potential for future growth. However, its relatively limited track record, small market share, and dependence on specific sectors require thorough consideration by potential investors.

Resources and Disclaimers:

• Principal U.S. Mega-Cap ETF website: https://principal.com/us/en/investor/us-mega-cap-etf-megas
• Principal Financial Group website: https://principal.com/us/en/
• Nasdaq US Mega Cap 125 Index: https://indexes.nasdaq.com/index/us/nmecc

Disclaimer: The information provided herein should not be considered financial advice and does not guarantee future performance. Investing involves inherent risks, and investors should conduct thorough research and due diligence before making any investment decisions.