Principal Exchange-Traded Funds Principal Value ETF (PY) seeks to track an index that measures undervalued U.S. stocks selected using fundamental value metrics. This value-focused equity ETF targets companies trading below their intrinsic worth based on price-to-book, price-to-earnings, and other traditional valuation measures.
How It Works
PY employs a rules-based methodology that screens the U.S. equity universe for stocks exhibiting classic value characteristics including low price-to-book ratios, low price-to-earnings multiples, and high dividend yields relative to growth rates. The fund uses a market-capitalization weighting approach within its value universe, rebalancing quarterly to maintain exposure to the most attractively valued securities. Holdings are concentrated in established companies that appear undervalued by traditional metrics.
Key Features
- Zero expense ratio provides cost-free access to value investing strategies, eliminating annual fees that typically range 0.20-0.60%
- Focuses exclusively on fundamental value metrics rather than momentum or growth factors for pure value exposure
- 2.14% dividend yield reflects the income-generating nature of undervalued, dividend-paying companies in the portfolio
Risks
- This ETF can lose value if value investing falls out of favor, as it has underperformed growth strategies for extended periods
- Value stocks may remain undervalued longer than expected, creating opportunity cost versus faster-growing alternatives during bull markets
- Concentrated exposure to cyclical sectors like financials and energy amplifies losses during economic downturns, potentially declining 40-50% in recessions
Who Should Own This
Best suited for patient, contrarian investors with 3-7 year time horizons seeking value exposure as a satellite holding (10-25% of equity allocation). Requires medium-to-high risk tolerance due to value's cyclical underperformance periods. Ideal for investors believing current market conditions favor undervalued stocks over growth momentum.