Are you on the lookout for some strong firms outside of the orbit of the so-called “Magnificent Seven?” Tech remains a major pillar of the economy, of course, but other firms can contribute as those mega-cap tech firms do. The right active ETF, managed by the right team, can augment an overall portfolio by identifying those non-tech stocks.
TCAF, the T. Rowe Price Capital Appreciation Equity ETF, presents one example. Whereas staid, indexed ETFs often get boxed in by the obligations of their indexes, active strategies retain more flexibility.
In TCAF’s case, the strategy has a broad remit to search for opportunities among quality large-cap U.S. firms. That said, it can also invest outside of large caps. It assesses those companies based on fundamental analysis, looking for firms with experienced management, an attractive valuation track record, and potential for high risk-adjusted returns based on the managers’ discretion.
The active ETF holds several of the Magnificent Seven, but not all comprise their largest-weighted firms. So, what kind of firms does the strategy hold right now as TCAF looks for capital appreciation? Consider the following three, all weighted at or above 2% per VettaFi’s ETF Database.
First off, TCAF weights Revvity Inc. (RVTY) at 2.1%. RVTY operates in the healthcare sector, providing a variety of tests, services, instruments, and software solutions per YCharts. The firm has done well over the long term, returning 152% over the last ten years. Currently, it sports an appealing 21.97 P/E ratio.
Shifting gears, TCAF also weights Canadian Natural Resources (CNQ) at 2.1%. CNQ derives most of its revenue from North American oil and natural gas development, exploration, and production. CNQ has returned 182% over the last three years, per YCharts.
Finally, weighted at 2.6%, the UnitedHealth Group Incorporated (UNH) also finds its place in the active ETF. As one of the largest private health insurers, UNH also sits in the large-cap category with CNQ. The firm has returned 64% over the last three years, with an 18.77 P/E ratio.
TCAF has returned 13.2% over the last three months by investing in those and other firms, outperforming its ETF Database Category and Factset Segment averages. Having only launched in June, the strategy is also nearing $1 billion in AUM. For investors looking to add an active ETF with a broad remit for quality to augment their Magnificent Seven holdings, TCAF can appeal.
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