🐮Discover the Power of Cash Cows

Greetings, fellow investors! Welcome to another insightful edition of the ETF UNO newsletter. In our continuous journey to explore valuable investment opportunities, today we bring you a gem from the world of ETFs – the Pacer U.S. Cash Cows 100 ETF (COWZ).

What is COWZ?

The COWZ ETF is a unique player in the ETF landscape. This fund specifically targets companies selected from the Russell 1000 index for the top 100 companies based on their free cash flow yield. In other words, it targets the "cash cows"—companies that generate significant free cash flow relative to their market capitalisation.

🌟Exploring the Success of COWZ ETF

Here is a summary of how the index that COWZ tracks (the Pacer US Cash Cows 100 Index) is built.

The Significance of Free Cash Flow💵

But what exactly is free cash flow? It's a vital indicator of financial health: seasoned investors usually consider companies with high free cash flow to yield attractive investment options, as they demonstrate financial strength and the ability to generate substantial returns for shareholders.

• Free Cash Flow (FCF): This represents a company's cash after covering its operational expenses and capital expenditures. It's essentially the net cash from regular business activities minus costs like expenses, interest, taxes, and investments for long-term projects.

• Enterprise Value (EV): This accurately measures a company's total value. It's the market capitalization adjusted to provide a more accurate picture. This adjustment is done by adding debts and subtracting any cash or cash equivalents the company has, ensuring a clear view free from capital structure biases.

• Free Cash Flow Yield (FCF/EV): This metric is critical for investors as it shows how much free cash flow a company generates relative to its enterprise value. It's an internal measure of a company's efficiency in generating cash relative to its size rather than directly reflecting the yield investors receive.

COWZ at a glance

ETF Issuer: Pacer ETFs

Inception: 16/12/2016

Asset Class: Equity

Underlying Index: Pacer US Cash Cows 100 Index

Geographical Focus: U.S.

Expense Ratio: 0.49% (as of last data point)

Dividend Yield: 1.83% (as of last data point)

Distribution Frequency: Quarterly

Historical Performance

Now, let's look at the COWZ ETF's historical performance. Since its inception in 2016, the fund has delivered an impressive, consistent annual return, outperforming the S&P 500 Index over the same period. The steady growth in net asset value and favourable comparisons with broader market indices testify to its robust strategy.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest in COWZ

1. Focused Investment Strategy: By honing in on companies with high free cash flow yields, the COWZ ETF provides exposure to financially sound and potentially undervalued companies that may be better positioned to weather economic downturns.

2. Dividend Potential: Companies with strong free cash flow can often sustain and grow their dividend payments, providing investors with a potential source of income.

3. Passive management: As an ETF, COWZ offers the benefits of passive management, including lower fees and tax efficiency compared to actively managed funds.

Top 3 Reasons Not to Invest in COWZ

1. Market Segment Focus: By focusing on the top 100 companies by free cash flow yield, the ETF may lead to missed opportunities in other potentially lucrative market segments.

2. Potential Overvaluation: High free cash flow companies might sometimes be overvalued, potentially limiting upside potential.

3. Market capitalisation bias: As a large-cap ETF, COWZ may miss out on the growth opportunities that smaller, more dynamic companies present.

💎 Investing in the COWZ ETF Way

To wrap it up, the COWZ ETF presents an intriguing investment opportunity for those seeking exposure to cash-rich, large-cap companies. By focusing on free cash flow yield, this ETF offers a unique approach to portfolio construction and the potential for strong returns. However, as with any investment, it's crucial to carefully consider the risks and ensure that COWZ aligns with your investment goals and risk tolerance.

As always, we encourage our readers to stay informed and engaged in the dynamic world of ETF investments. By subscribing to the ETF UNO newsletter, you ensure that you're always ahead of the curve in this exciting investment journey.

Happy investing, and until next time, keep your investments growing and your knowledge expanding!

DISCLAIMER: The information in this article is for educational purposes and should not be taken as investment advice. Investors should conduct their own research or consult a financial advisor before making investment decisions.