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Financials
Investors seeking to maximize returns while focusing on free cash flow as a key performance indicator have multiple options in the ETF market. The Pacer US Cash Cows 100 ETF (COWZ), the Pacer US Small Cap Cash Cows 100 ETF (CALF), and the Pacer US Cash Cows Growth ETF (BUL) are among the most popular choices for those interested in investing in companies with strong financial health. Each of these funds offers a unique approach to investing in free cash flow, with different targets, methodologies, and performances. This article will delve into the specifics of each ETF, comparing their investment strategies, expense ratios, performance records, and potential for future growth to help investors make the best decision.
Before diving into the details, let's take a brief look at what each ETF offers:
The COWZ ETF is one of the largest and most successful funds in this category, boasting over $23 billion in assets. It tracks the performance of the Pacer US Cash Cows 100 Index, focusing on companies from the Russell 1000 that display strong free cash flow yields based on the trailing twelve-month period. The ETF's portfolio is heavily weighted in sectors such as energy, healthcare, consumer discretionary, technology, and consumer staples. Some of the top holdings include ConocoPhillips, Marathon Petroleum, Exxon, Chevron, and Ford Motor[1]. COWZ has a proven track record of beating both the CALF and BUL ETFs in terms of total returns over the past few years[1].
The CALF ETF, on the other hand, is geared towards small-cap companies listed on the S&P SmallCap 600. It follows a similar methodology as COWZ but selects the top 100 firms in the small-cap arena. The fund's constituents are predominantly in the consumer discretionary sector, followed by technology, industrials, energy, and healthcare. Key companies in CALF include United Airlines, Expedia, Ovintiv, Flex, CF Industries, and Jazz Pharmaceuticals[1]. Despite its high dividend yield, CALF's performance has lagged behind both COWZ and BUL, especially in recent years[1].
The BUL ETF takes a different approach by focusing on growth-oriented companies within the S&P 900 Pure Growth Index. It selects the top 50 companies from this index based on their free cash flow performance. BUL’s portfolio is balanced across sectors like consumer discretionary, industrials, technology, healthcare, and consumer staples, with notable holdings such as Uber, Airbnb, Booking, Salesforce, Caterpillar, and IBM[1].
Each ETF has a distinct investment strategy tailored to appeal to different investor profiles:
The expense ratios of these ETFs are critical when comparing their overall costs:
Lower expense ratios can significantly impact long-term investment returns by reducing the fees investors pay annually.
Historical performance is a crucial factor in determining which ETF might be more appealing to investors:
Investors should also consider the volatility and correlation between these ETFs when diversifying their portfolios:
For income investors, comparing dividend yields is essential:
When deciding which free cash flow ETF to invest in, it's crucial to consider your investment goals and risk tolerance. COWZ stands out for its strong track record, affordability, and stability. CALF may appeal to those willing to take on higher risk for potential higher returns in the small-cap market. BUL is suitable for growth-oriented investors willing to endure higher volatility. Ultimately, COWZ offers a well-rounded investment experience with its proven performance and lower expense ratio, making it a solid choice for value investors seeking stable returns. However, each investor should weigh the specific characteristics of these ETFs against their personal investment objectives and market conditions.
