COWZ - 10+% FCF/EV Yield: Please poke holes!

[LearningMachine]

I'd like to invite fellow board members to poke holes in COWZ ETF that is based on FCF/EV yield.

 

It selects 100 stocks from Russell 1000 with highest FCF/EV yield, and then weighs them by TTM FCF.   Holes I see so far:

• 0.49% expense ratio translates to about 5% of earnings if it grows by only 10%.
• Selects companies that might be about to lose their FCF.
• As with other ETFs, probably does shenanigans like lending out the shares in the portfolio, exposing to some risk.
• Quarterly rebalancing could result in other people front running
• Defines FCF yield as FCF/EV, leaving out heavily indebted companies, but still I saw at least one mortgage reit squeezed in.

 

Pros I see are:

• FCF/EV yield was 10.19% as of 3/31/2022
• You don't have to pay capital gains taxes as it quarterly selects companies with highest FCF yield, and monetizes companies that have gone up in price.
• Probably better than average in bear markets.  YTD, it hasn't moved much.

 

I need to study more, especially the companies it selects, and whether I can bear owning the ones I don't like, and capital gains benefit is enough to overcome that. 

 

Folks, please poke holes :-).

 

Links:

• https://www.paceretfs.com/products/cowz. 
• Video at https://www.youtube.com/watch?v=kUyMqNq5IMo . 
• Podcast at https://podcasts.apple.com/us/podcast/etf-of-the-week-pacer-us-cash-cows-100-etf-cowz/id1396798703?i=1000521643152 .

Edited May 11, 2022 by LearningMachine

[Sweet]

It’s interesting but I don’t have anything useful to add.

[LearningMachine]

Upon looking through the companies in the COWZ etf, I realized I don't like a lot of them.  Some don't even have shareholder friendly culture to give money back to shareholders. 

 

So, I intersected COWZ holdings with holdings of another etf, PKW, which tracks stocks that have reduced shares by at least 5% in the last 12 months.

 

The result is the following list:

LPX

XRX

HPQ

AN

ALSN

LOPE

MAN

STLD

PHM

KSS

NUE

TPX

DGX

OC

LUMN

NVR

NXST

DBX

 

Any of these stocks folks like?  I like some of them but still many I don't like.

Edited May 20, 2022 by LearningMachine

[crs223]

55 minutes ago, LearningMachine said:

So, I intersected COWZ holdings with holdings of another etf, PKW

 

Great idea.  I'll be interested to see which of the COWZ are buying back during the upcoming downturn... not so much during the prior peak.