We get it: investing has never been harder. Economic data day-to-day is sending mixed signals, earnings seem uncertain, and valuations can be difficult to trust based on historical metrics. But just because it’s hard doesn’t mean you can’t find value, you just need a different approach.
In the upcoming webcast, Don’t Surrender on Value, Sean O’Hara, President, Pacer ETFs Distributors; and Michael Mack, Portfolio Manager, Pacer ETFs, will present a new way of thinking about Value and a handful of products that use this new approach.
For example, focusing on companies with steady free cash flow can be a more sound approach to security selection. Free cash flow is the cash left over after a company has paid expenses, interest, taxes, and long-term investments. It is used to buy back stocks, pay dividends, or participate in mergers and acquisitions. The ability to generate a high free cash flow yield indicates that a company is producing more cash than it needs to run the business, which can then be invested in growth opportunities.
Free cash flow producing companies generally have three defining characteristics – they are productive, reliable, and self-sufficient. The companies generate more cash flow then they spend, which allows them to grow without external financing. The free cash flow is a sturdy measure of profitability than earnings, which are subject to manipulation and accounting assumptions. Lastly, as the companies are less reliant on capital markets for financing, they won’t dilute their issued company stocks.
Investors interested in the free-cash-flow metric as a focused factor now have several options to choose from. For instance, the Pacer Global Cash Cows Dividend ETF (NYSEArca: GCOW), Pacer US Cash Cows 100 ETF (NYSEArca: COWZ), Pacer US Small Cap Cash Cows 100 ETF (BATS: CALF), Pacer Developed Markets International Cash Cows 100 ETF (BATS: ICOW), Pacer Emerging Markets Cash Cows 100 ETF (NasdaqGM: ECOW), Pacer US Cash Cows Growth ETF (BUL) and Pacer Cash Cows Fund of Funds ETF (HERD) all implement free-cash-flow yield screens to narrow down their universe.
Financial advisors who are interested in learning about value investing can register for the Thursday, September 17 webcast here.