Pacer ETFs, a small but growing exchange-traded fund sponsor in the Philadelphia area, on Tuesday launched two ETFs with entirely different mandates—one focuses on U.S. exporters, the other is a play on seasonal rotation investment strategies.
The Pacer U.S. Export Leaders ETF (PEXL) tracks an index comprising 100 mid- and large-cap companies that have both a high percentage of foreign sales and copious free cash flow growth.
The Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF (SZNE) harkens to the old saw of “sell in May and go away” by following an index that rotates between sectors in the spring and fall to provide exposure to sectors that have historically performed better during these periods.
Both products charge an expense ratio of 0.60 percent.
PEXL follows the Pacer U.S. Export Leaders Index that picks the top 200 companies in the S&P 500 and S&P MidCap 400 indexes with the highest annual foreign sales as a percentage of total sales. Then it narrows that down to 100 companies with the highest change in free cash flow growth over the past five years. The holdings are equally weighted.
Given the current hubbub about tariffs and trade wars, the timing of the fund’s launch seems less than propitious. But Pacer’s belief is that investors should tune out the short-term noise and instead focus on the long-term picture because global trade as we know it won’t cease, and companies that are proficient both in selling goods and services overseas and in producing free cash flow traditionally are good investments.
Information technology is the fund’s largest sector component at more than 44 percent, followed by health care (15 percent) and consumer discretionary and materials (both at 11 percent).
The top 10 positions include United Continental Holdings Inc., Discovery Inc., Alexion Pharmaceuticals Inc., Facebook Inc. and Advanced Micro Devices Inc.
Regarding the Pacer CFRA-Stovall Equal Weight Seasonal Rotation ETF, that fund has hitched its wagon to the S&P 500 Equal Weight Index and will alternate exposure semi-annually to certain sectors in that index.
Specifically, from November through April the fund will provide equal weight exposure to companies in the consumer discretionary, industrials, information technology and material sectors. From May through October, it will take a defensive stance by rotating into companies in the consumer staples and health care sectors.