The TrimTabs Float Shrink ETF (NYSEArca: TTFS) recently celebrated its third anniversary, but age is not the only cause for celebration with TTFS.
The actively managed ETF has received a five-star rating from Morningstar for both its three-year and overall risk adjusted performances from inception through October 31, 2014 out of 347 funds in Morningstar’s Mid-Cap Blend category, according to a statement issued by AdvisorShares today.
While TTFS is often compared to traditional buyback ETFs, the fund has been successful and gained a following for a methodology that extends well beyond share repurchases. “In pursuing its investment strategy, TTFS invests in companies that shrink their equity float—the total number of shares publicly available for trading—while growing free cash flow and reducing leverage on their balance sheets,” notes AdvisorShares.
Said another way, is one thing for a company to make a buyback announcement, but it is another thing altogether for that company to resist the temptation of increasing its float with executive stock options, which can mitigate the float shrink impact of the announced repurchase program. Additionally, historically low U.S. interest rates have encouraged companies to issue debt to fund buybacks, but TTFS leans toward companies that use free cash flow to repurchase shares rather than issuing debt to do buybacks. [A Closer Look at the Float Shrink ETF]
Since its inception on October 4, 2011, and through October 31, 2014, TTFS has outperformed the Russell 3000 Index. TTFS has a free cash flow yield of 6.73%, according to issuer data.
Investors have taken warmed to the TTFS story. In January, AdvisorShares announced the ETF topped $100 million in assets under management. Since then, TTFS has grown by more than 44%. [Float Shrink ETF Tops $100M in AUM]
The ETF’s holdings are equally weighted, which helps damp volatility and enhance returns. Among the 100 stocks found in TTFS are Dow components Visa (NYSE: V) and 3M (NYSE: MMM) along with General Mills (NYSE: GIS), eBay (NasdaqGS: EBAY), Gilead Sciences (NasdaqGS: GILD) and Oracle (NYSE: ORCL).
TTFS is the fourth AdvisorShares to earn a four- or five-star rating from Morningstar, joining the AdvisorShares Madrona Forward Domestic ETF (NYSEArca: FWDD) and the AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD) in the five-star club.
Chart Courtesy: AdvisorShares
Tom Lydon’s clients own shares of TTFS.