Invest in Real Assets With DFRA While the Housing Market Rebounds

The housing market appears to be rebounding, as signed contracts to buy existing homes in the U.S. rose for the second consecutive month in January. The National Association of Realtors’ index of pending home sales improved 8.1% to 82.5% in January. This marks the largest monthly increase since June 2020 and a higher increase than the projected estimate of 1.0% from Bloomberg economists, according to Yahoo! Finance.

“Buyers responded to better affordability from falling mortgage rates in December and January,” said NAR Chief Economist Lawrence Yun.

In another sign that the housing market is improving, Douglas C. Yearley Jr., chairman and CEO of luxury homebuilder Toll Brothers wrote in the company’s earnings release: “Since the start of the calendar year, we have seen a marked increase in demand beyond normal seasonality as buyer confidence appears to be improving.” Toll Brothers posted quarterly results that beat analyst expectations.

Investors looking to tap into real assets while the housing market looks to rebound may want to consider the Donoghue Forlines Yield Enhanced Real Asset ETF (DFRA), which seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FCF Yield Enhanced Real Asset Index, an investment strategy developed by FCF Advisors subsidiary FCF Indexes.

The fund invests primarily in U.S.-listed real asset companies of all sizes. This includes companies related to real estate, infrastructure, commodities, and natural resources.

Eligible securities are scored depending on their ability to generate profit and pay dividends using a fundamental evaluation that includes quality of earnings, free cash flow profitability, and dividend yield. Those that represent the top 25% of the scored equity universe are considered for inclusion.

Target weight is allocated to each security based on the combination of the three factors and market cap. Based on the target weight, the index selects up to 75 stocks or until 90% of the cumulative security weight has been included, whichever occurs first.

DFRA also provides a hedge against inflation, as it looks to provide better risk-adjusted returns than broad market equities in periods of positive inflation surprises. It also seeks to generate a higher dividend yield than broad market equities and the market cap-weighted real asset equities universe, with the potential of continuous dividend payments over the long term.

The fund applies FCF Advisors’ Free Cash Flow Quality Factor Model to seek alpha generation over a market cap-weighted real asset equity universe.

For more news, information, and strategy, visit the Free Cash Flow Channel.