The Pacer US Cash Cows ETF (COWZ) has pulled back in this month, erasing some of the gains made earlier this year.
It dropped to $62.45 on Thursday, down slightly from the year-to-date high of $64.
Still, there are a few reasons to be optimistic that it will rebound.
COWZ ETF is well-positioned as energy prices jump
The Pacer US Cash Cows ETF may benefit as the Iranian war continues, especially as signs emerge that it the war will last for a longer period, with Iran hoping to push oil prices to $200 and above.
Data shows that the energy sector has a big share in the fund.
Companies in the industry account for 20% of the fund and includes some of the top energy companies in the world, including popular names like ExxonMobil, Chevron, and ConocoPhillips.
These companies will likely continue doing well as energy prices rise.
Brent, the global benchmark, has jumped to $100, and most analysts expect the upward trajectory to continue in the foreseeable future as Iran has hinted that it will close the Strait of Hormuz for a while.
The three sides in this war have different goals. According to Trump, the US hopes to destroy Iran’s military and prevent the country from having nuclear weapons.
He has hinted that the US mission will be over in the next few weeks.
While Israel shares these goals, it also seeks to leave a failed state. As such, the country may continue destroying Iran for a while.
Iran, on the other hand, wants to survive and punish the US by hiking crude oil prices, with officials predicting that oil will get to $200 a barrel.
Such a move will benefit energy companies in the COWZ ETF.
Exposure in other key industries
The COWZ ETF will also benefit from the fact that it is highly diversified in other industries.
For example, the biggest segment in the fund is healthcare, which accounts for 23% of all its constituents.
Some of the biggest healthcare companies in the fund are Gilead Sciences, Merck, Bristol-Myers Squibb, and Amgen. The others are Amgen and Cardinal Health.
These companies are often seen as being all-weather names because of how they make their money.
In the United States, these firms make money from private insurance companies and from government agencies like Medicare and Medicaid. As such, they always generate substantial cash flows even in bear markets.
The fund is also made up of other industries, including technology, communication services, consumer staples, and consumer discretionary. This makes it less exposed to the AI industry.
There are signs that the COWZ ETF has become a bargain.
Data on its website shows it has a price-to-earnings ratio of 16.3, much lower than the S&P 500 Index average of 23. It is also lower than the Russell 1000 average of 27.
COWZ stock technical analysis points to a rebound
COWZ share price chart | Source: TradingView
The daily timeframe chart shows that the COWZ stock price has crashed in the past few weeks, moving from a high of $64.7 to the current $62.4.
Similarly, the Relative Strength Index and the MACD indicators have all dropped sharply in the past few weeks.
On the positive side, the ETF remains above the 100-day Exponential Moving Average (EMA).
It is also above the ascending trendline that connects its lowest swings in May, October, and November last year.
Therefore, the stock will likely rebound, potentially to the psychological level at $70.
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