We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The global markets may be hitting highs but risk factors prevail thanks to overvaluation concerns, uncertainty over the Fed rate hike, the yet-unseen impact of Brexit and oil price volatility. So, with plenty of deterrents still doing rounds in an apparently strong market, it is wise to look for quality while picking stocks.
Market watchers and participants are thus trying out different valuation indicators and running screeners to land up on trustworthy stocks. In this regard, a high free-cash flow yield approach can be fascinating.
Since we know that a cash cushion is always needed in a rough market, one can easily take a look at the indicators related to cash flows to measure the performance of a company. One of the important factors that makes free cash flow a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing the financial health of a company.
Pacer Financial is greatly exploring this area. It has a cash cow series with Pacer Global Cash Cows Dividend ETF (GCOW - Free Report) and Pacer US Cash Cows 100 ETF (COWZ - Free Report) already in place and lately broadened this lineup with the launch of Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report) and Pacer Developed Markets International Cash Cows 100 ETF (ICOW - Free Report) (read: 4 ETFs to Profit Out of Cash Kings).
What is a Cash Cow?
As per Investopedia, “a cash cow can also refer to a business, product or asset that, once acquired and paid off, will produce consistent cash flow over its lifespan.” In other words, these companies are known for continuous positive cash flows, reflecting their inherent strength (read: Trump Rally to Wane? Buy These Quality ETFs).
Inside the Recently Launched Funds
ICOW in Focus
This international fund will track the Pacer Developed Markets International Cash Cows 100 Index to give exposure to large and mid-cap non-U.S. companies in developed markets having high free cash flow (FCF) yields. The underlying index initially chooses stocks from the FTSE Developed ex US Index.
The FCF yield of the index is 7.21% annually (higher than FTSE Developed ex-US Index‘s yield of 3.33%) and P/E ratio is 12.39x (lower than the parent index’s 17.54x). No stock accounts for more than 2.36% of this 100-stock fund. The fund charges 65 bps in fees.
CALF in Focus
As the name suggests, the fund follows the S&P SmallCap 600 index to pick the top 100 companies based on free cash flow yield. Its FCF is 9.68% (higher than the parent index’s 3.23% yield) and P/E ratio is 18.37x (lower than the parent index’s 23x). The fund is heavy on Consumer Discretionary (38.27%), Information Technology (20.86%) and Industrials (17.87%). The fund charges 59 bps in fees.
Competition
The newly launched funds may not face stiff competition now apart from TrimTabs Float Shrink ETF (TTAC - Free Report) which looks to beat a U.S. equity index, not the international gauges. This fund picks companies that are “generating free cash flow and reducing their share count.” However, Pacer funds may see tough pressure if TrimTabs’ planned set of free cash flow funds hit the market (read: Ten Predictions for the ETF Industry in 2017).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Pacer Adds Two New ETFs to its Cash Cow Lineup
The global markets may be hitting highs but risk factors prevail thanks to overvaluation concerns, uncertainty over the Fed rate hike, the yet-unseen impact of Brexit and oil price volatility. So, with plenty of deterrents still doing rounds in an apparently strong market, it is wise to look for quality while picking stocks.
Market watchers and participants are thus trying out different valuation indicators and running screeners to land up on trustworthy stocks. In this regard, a high free-cash flow yield approach can be fascinating.
Since we know that a cash cushion is always needed in a rough market, one can easily take a look at the indicators related to cash flows to measure the performance of a company. One of the important factors that makes free cash flow a highly dependable metric is that operating cash flow adds back non-cash charges such as depreciation and amortization to net income, truly diagnosing the financial health of a company.
Pacer Financial is greatly exploring this area. It has a cash cow series with Pacer Global Cash Cows Dividend ETF (GCOW - Free Report) and Pacer US Cash Cows 100 ETF (COWZ - Free Report) already in place and lately broadened this lineup with the launch of Pacer US Small Cap Cash Cows 100 ETF (CALF - Free Report) and Pacer Developed Markets International Cash Cows 100 ETF (ICOW - Free Report) (read: 4 ETFs to Profit Out of Cash Kings).
What is a Cash Cow?
As per Investopedia, “a cash cow can also refer to a business, product or asset that, once acquired and paid off, will produce consistent cash flow over its lifespan.” In other words, these companies are known for continuous positive cash flows, reflecting their inherent strength (read: Trump Rally to Wane? Buy These Quality ETFs).
Inside the Recently Launched Funds
ICOW in Focus
This international fund will track the Pacer Developed Markets International Cash Cows 100 Index to give exposure to large and mid-cap non-U.S. companies in developed markets having high free cash flow (FCF) yields. The underlying index initially chooses stocks from the FTSE Developed ex US Index.
The FCF yield of the index is 7.21% annually (higher than FTSE Developed ex-US Index‘s yield of 3.33%) and P/E ratio is 12.39x (lower than the parent index’s 17.54x). No stock accounts for more than 2.36% of this 100-stock fund. The fund charges 65 bps in fees.
CALF in Focus
As the name suggests, the fund follows the S&P SmallCap 600 index to pick the top 100 companies based on free cash flow yield. Its FCF is 9.68% (higher than the parent index’s 3.23% yield) and P/E ratio is 18.37x (lower than the parent index’s 23x). The fund is heavy on Consumer Discretionary (38.27%), Information Technology (20.86%) and Industrials (17.87%). The fund charges 59 bps in fees.
Competition
The newly launched funds may not face stiff competition now apart from TrimTabs Float Shrink ETF (TTAC - Free Report) which looks to beat a U.S. equity index, not the international gauges. This fund picks companies that are “generating free cash flow and reducing their share count.” However, Pacer funds may see tough pressure if TrimTabs’ planned set of free cash flow funds hit the market (read: Ten Predictions for the ETF Industry in 2017).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>