The New York Stock Exchange announced the launch of the CCM Global Equity ETF (NYSE Arca: CCMG) on Thursday. According to its summary prospectus, the actively managed ETF invests primarily in equities selected by its sub-advisor, CCM Investment Group.
With CCMG, CCM seeks to identify the most attractively valued companies. Namely, companies with the largest profits relative to their enterprise value. When selecting domestic stocks for CCMG, CCM begins with an investment universe of about 3,000 of the largest U.S. companies by market capitalization. CCM then measures a company’s valuation by evaluating its shareholder yield and free cash flow yield.
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Evaluating Shareholder & Free Cash Flow Yield
CCM determines a company’s free cash flow yield by its five-year average free cash flow, adjusted to account for stock-based compensation and compared to enterprise value. Enterprise value is calculated primarily on the company’s market capitalization and indebtedness. The fund will exclude companies that fail to have five years of positive shareholder yield and free cash flow over the past 10 fiscal years.
CCMG also considers a company’s price momentum when selecting investments. CCM will eliminate companies that have demonstrated strong negative price momentum over 12 months.
CCMG will also invest in other ETFs with strong performance records, lower operating expenses, lower portfolio turnover, below-average capital gains distributions, and a demonstrated expertise and focus on CCM’s desired asset class. CCMG will hold ETFs that generally represent investments where its managers believe its own management would not be superior in terms of cost and/or abilities.
CCM will generally allocate 50%-75% of the fund’s assets to domestic equities, 20%-30% to developed market stocks, and the rest to emerging market equities.
The prospectus lists CCM’s Senior Investment Strategist James Yaworski and CIO Adam Hoffmann as the fund’s portfolio managers. CCMG charges 34 basis points.
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