ETF Watch: US ‘Cash Cows’ Fund Launches

The latest ETF to enter the market looks for free cash flow when picking stocks.
Reviewed by: Staff
Edited by: Staff

The Pacer US Cash Cows 100 ETF (COWZ) is the latest ETF to hone in on companies with solid cash flow.

Listing today on Bats, which owns, COWZ is linked to a proprietary index that picks securities from the Russell 1000. The selection process screens out companies with negative projected cash flow or earnings, as well as financials, with the exception of REITs. It then ranks the remaining securities by their free cash flow yield for the trailing 12 months.

The portfolio ultimately comprises the 100 large- and midcap U.S. companies with the highest free cash flow yield, according to the prospectus.

Free cash flow is not the same thing as dividends. It’s simply a measure of cash after capital expenditures—cash a company has on hand after all of its operating costs, and cash that a company can spend however it chooses.

3-Part Series

COWZ is part of a three-ETF series from Pacer, including the Pacer Developed Markets International Cash Cows 100 ETF (ICOW) and the Pacer Emerging Markets Cash Cows 100 ETF (ECOW), still in registration.

COWZ comes with a 0.49% expense ratio.

The fund is akin to the international-in-scope TrimTabs Intl Free-Cash-Flow ETF (FCFI), which owns 160 securities, and has $13 million in assets gathered since it came to market in June 2015.

Pacer currently has six ETFs that are actively trading, with nearly $670 million in total assets under management. Four of the funds are based on the firm’s “Trendpilot” strategy, which relies on market signals in the form of moving averages to switch an index’s allocation.

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