Inside Pacer's Planned Cash Cow ETF Pack Of Three
Zacks Investment Research | Aug 26, 2016 02:45AM ET
Thanks to global growth slowdown, uncertainty over the Fed rate hike, the yet-unseen impact of Brexit and oil price volatility – the risk factors are still with us, no matter how many highs the broader U.S. market hit in the recent past. So, with plenty of deterrents still doing rounds in an apparently stable market, it is wise to look for value and stability while stock picking (read: Should You Diversify Your ETF Portfolio Amid Rising Uncertainty? ).
Market watchers and participants are thus trying out different valuation indicators and running screeners to land up on trustworthy stocks. While many valuation metrics do the desired job, a high free-cash flow yield approach can be intriguing.
Keeping this in mind, Pacer Financial has filed cash cow ETFs based on U.S., non-U.S. developed markets and emerging markets.
What is a Cash Cow?
As per Investopedia , “a cash cow can also refer to a business, product or asset that, once acquired and paid off, will produce consistent cash flow over its lifespan.” In a nutshell, these companies are known for continuous positive cash flows, reflecting the inherent strength of the company.
Below we highlight three planned ETFs in detail:
Pacer US Cash Cows 100 ETF
As per the Why Small-Cap Value ETFs Are Winning Picks Now ).
Initially the underlying index picks stocks from the Russell 1000 Index. Companies having negative average projected free cash flows or earnings and financial companies, other than real estate investment trusts are barred. Shares of 100 remaining companies with the strongest free cash flow yield get an entry card.
Pacer Developed Markets International Cash Cows 100 ETF
This international fund will trackthe Pacer Developed Markets International Cash Cows 100 Index to give exposure to large and mid-cap non-U.S. companies in developed markets having high free cash flow yields. The underlying index initially chooses stocks from the FTSE All-World Developed ex US Index and follows the same stock-picking criteria as stated above.
Pacer Emerging Markets Cash Cows 100 ETF
As the name suggests, the proposed fund follows the similar investment objective and stock-picking criteria. The underlying index of the fund is Pacer Emerging Markets Cash Cows 100 Index, which initially chooses stocks from the constituent companies of the FTSE Emerging Markets Index.
Competition
The international version of the Pacer fund will face direct competition from TrimTabs’ free cash flow ETF TrimTabs International Free-Cash-Flow ETF Earn 4% Yield with These Dividend ETFs ).
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