Pacer Funds has expanded on its line of customized, smart beta index-based ETFs with two new options that track U.S exporters and a seasonal rotation strategy.
Pacer recently came out with the Pacer US Export Leaders ETF (NYSEArca: PEXL) and the Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF (NYSEArca: SZNE), which both have a 0.60% expense ratio.
The Pacer US Export Leaders ETF will try to reflect the performance of the Pacer U.S. Export Leaders Index, which is screens the top 200 companies in the S&P 500 and S&P MidCap 400 with the highest annual foreign sales as a percentage of total sales and narrows the pool down to the 100 companies with the highest change in free cash flow growth over the past five years. The 100 components are then equally weighted.
“These are U.S. companies that are able to expand their reach beyond domestic markets while maintaining substantial free cash flow growth. PEXL offers the opportunity to invest in these high-quality, U.S.-based large-cap and mid-cap companies that have proven themselves to have higher earnings growth and revenue growth than their domestic-only counterparts. Smaller companies that don’t trade around the world have limited growth potential. Bigger firms that have connected with consumers around the world can be a great fit for an investment portfolio,” Sean O’Hara, President of Pacer ETF Distributors, said in a note.
While the markets have been focused on increased trade barriers with escalating trade war rhetoric out of President Donald Trump, O’Hara argued that investors should ignore the short-term noise and focus on long-term results.
“We may see better conditions for U.S. exporters come out of these frank trade discussions. But no matter what, global trade will continue to march forward. Companies that do a great job selling their goods and services overseas, and in particular those with a proven history of free cash flow growth, can be a great choice for investors,” Joe Thomson, Founder and President of Pacer Financial, added.
Pacer Partners With CFRA
Additionally, Pacer partnered up with CFRA and Sam Stovall, its chief investment strategist for U.S. equities, to launch the Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF, which tries to reflect the performance of an index that alternates exposure semi-annually to certain sectors in the S&P 500 Equal Weight Index. The approach was influenced by the investing adage “Sell in May and Go Away,” where the fund rotates into sectors that have historically fared well during certain times of the year.
“CFRA and Sam have offered tremendous analysis on both the stock market and the economy for a very long time. Sam’s 20-plus years of experience as Chief Equity Strategist at S&P and strategic approach to investing have us extremely excited about this partnership. Their analysis supports our belief in giving investors a common-sense approach with a risk management component that may help grow their nest eggs and preserve them in case of a downturn,” O’Hara said.
From November through April, SZNE will track an equal weight exposure to companies in the consumer discretionary, industrials, information technology and material sectors. On the other hand, from May through October during the perceived down months, the ETF will be exposed to companies in the defensive sectors of consumer staples and health care.
“CFRA is pleased to partner with Pacer to provide equity strategies that leverage the stock market’s tendency to exhibit alternating seasonal strength and weakness. Our research shows that historically the S&P 500’s average price change has been substantially higher during the six months from November 1 through April 30 than it has been during the six months from May 1 through October 31, but we believe you should rotate based on seasonal sector trends, not retreat,” Sam Stovall said.
For more information on new fund products, visit our new ETFs category.