Pacer has expanded its popular suite of ‘Cash Cows’ ETFs with a new fund that invests in the highest free cash flow generators within the growth-oriented Nasdaq 100.
Sean O’Hara, President of Pacer ETFs Distributors.
The Pacer Nasdaq-100 Top 50 Cash Cows Growth Leaders ETF (QQQG US) has been listed on Nasdaq with an expense ratio of 0.49%.
Free cash flow is a measure of a company’s financial performance, calculated as operating cash flow minus capital expenditures. It represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.
The metric is important because it shows a company is producing more cash than it needs to run the business and can invest in growth opportunities.
By focusing on free cash flow, the Cash Cows methodology may be better able to scrutinize the underlying corporate fundamentals of each company. Indeed, management tends to have less discretion on how free cash flow is reported, compared to other metrics such as sales, earnings, assets, or liabilities which can, in some cases, be massaged.
Sean O’Hara, President of Pacer ETF Distributors, commented: “Growth opportunities are a critical component of a well-rounded investment portfolio, but many growth-oriented funds are often similar in their underlying holdings and approaches.
“We’ve launched this new fund to provide investors with a new avenue to access these opportunities and further our goal of bringing investors unique solutions to meet their investing goals.”
Methodology
The ETF is linked to the Pacer Nasdaq-100 Top 50 Cash Cows Growth Leaders Index which screens the Nasdaq 100, the largest 100 non-financial companies listed on Nasdaq, for the 50 firms with the highest free cash flow margins (free cash flow/revenue).
Constituents are weighted according to their 12-month share price momentum while capping any individual stock at 5%.
The index is reconstituted and rebalanced every quarter.