Cash Cows ETF Is a Rare Breakout Star

Cash Cows ETF Is a Rare Breakout Star

The fund’s rapid ascent puts it in rarified air.

Senior ETF Analyst
Reviewed by: Sumit Roy
Edited by: Sumit Roy

Every few years, an ETF that no one’s heard of catches fire.  

A decade ago, it was the WisdomTree Japan Hedged Equity ETF (DXJ) and the WisdomTree Europe Hedged Equity Fund (HEDJ); a few years after that, it was the iShares MSCI USA Min Vol Factor ETF (USMV); and more recently, it was the ARK Innovation ETF (ARKK).  

In an industry with a massive assets under management gap—the top 1% of ETFs own 44% of the assets and the top 5% own 76% of the assets—these breakout stars are rare. 

That’s why I’ve been watching the rocket ship growth of the Pacer US Cash Cows 100 ETF (COWZ) in awe. This is a fund that had a mere $250 million in assets two years ago. Monday, it had $13 billion and counting.  

Just since the start of 2023, AUM in the ETF has grown 30%, from $10 billion to $13 billion. Holy cow! 

Right Place at the Right Time  

Obviously, there’s no secret formula that determines the wild success of funds like COWZ and its ilk. But a common thread among them is being at the right place at the right time.  

For instance, DXJ and HEDJ were there when the U.S. dollar rocketed to a 12-year high in 2015, causing many investors to hedge their foreign currency exposure using those ETFs.  

USMV was there when “smart beta” took the investment world by storm in the mid-2010s, and the markets were roiled by a series of China-related sell-offs that had investors clamoring for a safer way to invest.  

And of course, ARKK was there when the growth-at-all-costs mentality infected investors during the postpandemic asset price bubble.  

Being at the right place at the right time doesn’t mean launching the moment before the market environment shifts to favor a certain investment strategy. 

DXJ, USMV and ARKK were around for years before they caught fire. 

Like an artist who that toils away in obscurity before a lucky break catapults them into stardom, these ETFs found their success in a similar way. 

The same can be said of COWZ. It came to market in 2016 and didn’t cross $100 million in AUM until 2018.  

It was far from an overnight success. For five years, COWZ bided its time until the perfect moment arrived. 

A Sharp Turn  

In 2022, the market environment turned sharply against unprofitable growth stocks and toward profitable value stocks. 

COWZ—an ETF that invests in the 100 stocks from the Russell 1000 that have the highest free cash flows yields—was perfectly positioned for this shift. 

Unlike traditional value ETFs, like the Vanguard Value ETF (VTV), which use a combination of metrics like price-to-earnings and price-to-book ratios to select which stocks to hold, COWZ uses free cash flow yields. 

This is the inverse of the price-to-free-cash-flow ratio. Some investors consider free cash flow to be a measure of profitability that’s harder to manipulate than earnings, and a measure that’s more relevant to the worth of a company than book value.  

For some investors who were (and still are) eager to get their hands on reasonably priced, profitable companies, COWZ is seen as an alternative to the value ETFs they’ve traditionally turned to. 

So far, their bet has paid off. In 2022, COWZ gained 0.2% versus a 2.1% loss for VTV (and an 18.1% loss for the S&P 500).  

Since its inception in December 2016, COWZ is up 110% versus 89% for the S&P 500 and 75% for VTV. 

Changing World  

For Sean O’Hara, president of Pacer ETFs Distributors, a cash-flow-focused strategy makes more sense in today’s world.  

O’Hara elaborated on a recent podcast: 

“The world has changed. We’re not a manufacturing-based society anymore. We’re basically a consumption-based, health-care-based, technology, communication services and brand-based economy here in the United States, and moving that way across the world as well.  

The majority of the U.S. stock market’s market value in the ’70s could be attributed to tangible assets—things you can see, touch, feel, pick up and put a price tag on—and that’s good for traditional price-to-book investing. But today, 90% of the stock market’s value is based on intangibles.”  

“In a world where you can’t point to physical assets anymore, you have to find a different metric. That’s how we stumbled upon free cash flow and free cash flow yield.” 

According to Ohara, the higher its free cash flow yield is, the cheaper a stock is. He also believes that the cash flow strategy isn’t just a replacement for traditional value strategies; it can be used to select the best stocks within any stock market category—including growth.  

“We think traditional growth is as flawed as traditional value. The metric that most people look at for growth investments is sales growth. The research we have tells us that sales growth by itself does not necessarily equal stock market performance. It’s only profitable sales growth that matters, so we use free cash flow margin as the screen.” 

Pacer currently has eight ETFs within its Cash Cows suite, nearly all of which have seen an explosion of demand recently. 

The Pacer Global Cash Cows Dividend ETF (GCOW) has $1.4 billion in AUM, a 10 times increase from the start of 2022. The Pacer US Small Cap Cash Cows 100 ETF (CALF) is up to almost $2 billion, double what it was five months ago. And the Pacer Developed Markets International Cash Cows 100 ETF (ICOW) is at nearly $400 million after sitting around $100 million in October.  

O’Hara says his firm plans on building a whole series of “Growth Cows” to go next to the “Value Cows” it already has on the market. 

The Pacer US Cash Cows Growth ETF (BUL) debuted in 2019, but with only $41 million in AUM, at least so far, it hasn’t caught on like the other ETFs in the suite.  

Staying Power  

It will be interesting to see how big this herd of Cash Cows ETFs grows and whether the momentum can continue. If history is any guide, sometimes these breakout ETF stars can sustain their momentum, while other times, they end up crashing back down to Earth. 

DXJ and HEDJ lost their shine once the dollar rally ran out of steam, while ARKK crashed and burned as the growth bubble popped. 

On the other hand, USMV had more staying power, and even went on to build on top of the initial asset boom it had in 2016. 

We’ll see what happens with COWZ. 


Email Sumit Roy at [email protected] or follow him on Twitter sumitroy2     

Sumit Roy is the senior ETF analyst for, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for, with a particular focus on stock and bond exchange-traded funds.

He is the host of’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays,’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.