Adding onto its free-cash-flow theme, TrimTabs Asset Management has launched an international exchange traded fund option to help investors gain exposure to foreign companies generating strong free cash flow.
On Wednesday, TrimTabs launched the actively managed TrimTabs All Cap International Free-Cash-Flow ETF (BATS:TTAI). TTAI has a 0.59% expense ratio.
The portfolio is managed by Theodore M. Theodore and Janet F. Johnston.
The All Cap International Free-Cash-Flow ETF tries to outperform the performance of the S&P Developed ex-U.S. Index by screening for companies’ relative decrease in their outstanding shares or float shrink over approximately the past six months, relative increase in their free cash flow over the past six months and the relative decrease in their leverage over the past six months.
The new ETF selects approximately 85 companies in non-U.S. developed markets, including Europe, Asia, South Asia, and Canada, that are both generating free cash flow, reducing their share count without the use of leverage, and maintaining healthy balance sheets.
“The proprietary algorithm is the engine that drives the whole investment process, and we are now able to survey all global equities to find those that meet our criteria,” Ted Theodore, Chief Investment Officer at TrimTabs Asset Management, said in a note.
Companies have enormous discretion in how they report sales, earnings, assets, and liabilities. However, free cash flow is significantly less likely to be subject to some of the financial gimmickry in today’s accounting practices. Free cash flow provides closer scrutiny of underlying corporate fundamentals, making it easier to identify quality companies with growing cash reserves.
Furthermore, the focus on share reductions or companies that execute share reductions by lowering the amount of shares outstanding, most commonly through stock buybacks, is also another value screen. This helps investors as they end up holding a “larger piece of the pie.” TrimTabs also takes an extra step by targeting companies that execute buybacks are only doing so with free cash flow and not through additional leverage.
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TTAI is similar to TrimTabs’ other U.S. domestic-market oriented ETF play, TrimTabs Float Shrink ETF (BATS:TTAC), which targets U.S. companies that have strong free cash flow and reduce share counts.
“We’re thrilled to be able to expand our free cash flow offerings to encompass non-US based companies as well,” Charles Biderman, Founder of TrimTabs Asset Management, said in a note. “When used in conjunction with one another, TTAI and TTAC will allow investors to customize their domestic and international free cash flow exposure, all within one product suite.”
Investors who are feeling a sense of déjà vu may remember that TrimTabs had previously listed the TrimTabs International Free-Cash-Flow ETF (NYSEArca:FCFI), which debuted in June 2015 and closed on Oct. 2016.
For more information on new fund products, visit our new ETFs category.