Behind the Scenes With the Float Shrink ETF

“Avoiding companies that borrow to repurchase shares offers TTFS downside protection if rates rise,” said Chen. “In general, companies with higher leverage are riskier and more volatile. Ultimately, the TTFS free cash flow screen is good for investors.”
It is hard to argue with the results. TTFS, which turns three in October, is up 91.25% since coming to market, according to Morningstar data.

As Chen notes, the ETF’s equal weight strategy has served it well. TTFS holds 100 stocks, none if which account for more than 1.1% of its weight, according to AdvisorShares data. TTFS is also diverse at the sector level with consumer discretionary, industrial, technology, health care, staples and financial services names all receiving double-digit sector weights.

Chen said TTFS was purposefully designed as an equal weight ETF because of the long-term track record that strategy has, noting that TTFS has a lower beta and is less volatile than an equal version of the S&P 500 even though it has more exposure to mid- and small-caps on a percentage basis.

TTFS Sector Weights

*Data as of March 31, 2014
Chart Courtesy: AdvisorShares
Tom Lydon’s clients own shares of TTFS.