The Fourth Quarter will be a challenging time for advisors. It will be volatile, it will be driven by top-line headlines, and one way or another, the political climate will shift. There will be winners and losers, regardless of the outcome. So what’s the right rubric for positioning a portfolio?
In the upcoming webcast, The Fundamental You’re Probably Overlooking: Free Cash Flow, Bob Shea, CEO and Chief Investment Officer, TrimTabs Asset Management; Janet Flanders Johnston, Co-Chief Investment Officer and Portfolio Manager, TrimTabs Asset Management; and John Forlines III, Chief Investment Officer of Donoghue Forlines, Portfolio Manager for the Donoghue Forlines Global Tactical Portfolios, will break down how certain sectors of the economy will react over the next 6 months and how to invest in the markets ahead.
As we look to alternatives strategies to hedge against potential market swings, investors may consider a strategy that targets free cash flow to capture companies with organic growth. 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 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 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.
The TrimTabs team has produced a successful track record for its two ETF offerings, the TrimTabs All Cap International Free-Cash-Flow ETF (BATS: TTAI) and the TrimTabs All Cap US Free-Cash-Flow ETF (BATS: TTAC), by packaging their active management style along with robust quantitative analysis to provide investors with an “all weather” core equity exposures.
Financial advisors who are interested in learning more about free cash flow strategies can register for the Friday, October 16 webcast here.