ETF Trends
ETF Trends

The ability to generate free cash, and lots of it, is one of the most important signs of a company’s financial health and investment merit. Investors can capture a collection of prodigious free cash generators with the convenience of just one exchange traded fund, the TrimTabs Float Shrink ETF (NYSEArca: TTFS).

On the upcoming webcast, Free Cash Flow: What It Means for Investors, scheduled for Thursday June 25 at 2PM Eastern time, TrimTabs Chairman and portfolio manager Charles Biderman will join ETF Trends publisher Tom Lydon to explore the TrimTabs approach to free cash flow research and how that research plays out in the TrimTabs Float Shrink ETF.

While TTFS is often lumped into the same category as traditional buyback ETFs, the actively managed fund’s inclusion of share count reduction only tells part of the story. TTFS does not focus solely on companies engaged in share buybacks. TTFS is an equal-weight fund that focuses on companies that have reduced their shares outstanding over the prior 120 days. The ETF’s holdings are selected based on three primary criteria: Shareholder friendliness via float shrinkage, profitability measured by free cash flow and balance sheet sturdiness measured by leverage ratio. [A Selective Approach to Buyback ETFs]

The TTFS methodology has struck a chord with advisors and investors as highlighted by its nearly $247 million in assets under management, representing asset growth of almost 150% since January 2014 and growth of almost 50% since March. TTFS has also earned the prestigious five-star rating from Morningstar in two consecutive years. [Another Milestone for the Float Shrink ETF]

Another important element to the buyback ETF equation is sector weights. Like its rivals, TTFS is heavy on technology and consumer discretionary names, which currently combine for 35% of the fund’s weight. TTFS holdings include Dow components Apple (NasdaqGS: AAPL), Cisco Systems (NasdaqGS: CSCO), Intel (NasdaqGS: INTC) and Microsoft (NasdaqGS: MSFT) as well as biotech giants Celgene (NasdaqGS: CELG) and Gilead Sciences (NasdaqGS: GILD).

TTFS has other perks, including being an incidental haven for takeover targets. Since TTFS debuted in October 2011, 57 of its holdings have been acquired, indicating that buyers enjoy acquiring firms with tidy balance sheets. On average, 1.3 TTFS holdings per month have been acquired since the ETF launched. Alone, that statistic is impressive, but it is even more so when considering the ETF holds just 100 stocks.

Advisors interested in attending the webcast on Thursday June 25 at 2PM Eastern time can register here.

Tom Lydon’s clients own shares of Apple and TTFS.