What is the COWZ ETF ?
ETFs (Exchange-Traded Funds) have become popular financial instruments for investors seeking exposure to various markets and asset classes. Among the many ETFs available, the COWZ ETF stands out as an intriguing option for those interested in large and mid-capitalization U.S. companies with high free cash flow yields. In this article, we will delve into the details of the COWZ ETF, its underlying principles, benefits, and important considerations for potential investors.
COWZ ETF: Overview
The COWZ ETF, whose ticker symbol is derived from "COWS" or "cash cows," is a passively managed ETF. It employs an indexing investment approach, aiming to track the total return performance of the proprietary Index developed and maintained by Index Design Group, an affiliate of Pacer Advisors, Inc., the Fund's investment adviser.
The Index's objective is to provide exposure to large and mid-capitalization U.S. companies that demonstrate high free cash flow yields. These "cash cows" are companies with strong cash flow from operations, which is the money generated after accounting for capital expenditures.
COWZ ETF Underlying and Exposure: What does it track and how?
The COWZ ETF's investment strategy begins by selecting companies from the component companies of the Russell 1000® Index, which represents the largest 1000 U.S. stocks by market capitalization. The initial universe is then screened based on their average projected free cash flows and earnings over the next two fiscal years.
Companies with negative average projected free cash flows or earnings are excluded, while those with no forward year estimates available for free cash flows or earnings remain in the Index universe. Financial companies, excluding real estate investment trusts (REITs), are also excluded from the Index universe.
The remaining companies are ranked based on their free cash flow yield over the trailing twelve months, and the equity securities of the top 100 companies with the highest free cash flow yield are included in the Index.
The weighting of the companies in the Index is based on their trailing twelve-month free cash flow, with individual company weightings capped at 2% of the Index's total weight. The Index is rebalanced quarterly, ensuring it stays current and relevant to market conditions.
COWZ overlap What is the COWZ ETF ?
COWZ ETF: Benefits to Invest in This ETF
The COWZ ETF offers several benefits for investors who are interested in companies with strong cash flow fundamentals:
Diversification: By investing in the COWZ ETF, investors gain exposure to a diversified portfolio of large and mid-cap U.S. companies with healthy free cash flow yields. This diversification can help reduce the impact of individual stock fluctuations on overall portfolio performance.
Passive Management: The ETF follows a passive investment approach, which means it seeks to replicate the performance of the underlying Index. Passive management generally incurs lower fees compared to actively managed funds, which can be advantageous for long-term investors.
High Free Cash Flow Yields: Companies with high free cash flow yields are often considered financially healthy and well-managed. Investing in such companies can potentially lead to consistent returns over the long term.
COWZ ETF: Considerations Before Investing
While the COWZ ETF offers compelling features, there are some important considerations for investors to keep in mind:
Market Risks: Like any investment, the COWZ ETF is exposed to market risks. Economic conditions, geopolitical events, and industry-specific factors can impact the performance of the underlying companies and the ETF itself.
Past Performance: While historical performance can provide valuable insights, it does not guarantee future results. Investors should consider the fund's long-term objectives and assess whether they align with their own investment goals.
Diversification: Although the COWZ ETF provides diversification within its portfolio, investors should ensure that it fits well within their overall investment strategy and doesn't overlap with other holdings.
Conclusion:
The COWZ ETF presents an attractive investment option for those seeking exposure to U.S. companies with high free cash flow yields. With its passive management approach and focus on cash cows, the COWZ ETF offers potential benefits for investors looking to diversify their portfolios. However, as with any investment decision, it's essential to conduct thorough research and consider individual financial goals and risk tolerance.
Disclaimer: This article is for informational purposes only and does not provide investment advisory services. Investing in financial instruments carries risks, and individuals should consult with a financial advisor before making any investment decisions.
COWZ ETF issuer
COWZ ETF official page
COWZ quote and analysis
Discover the top holdings, correlations, and overlaps of ETFs using our visualization tool.
Our app allows you to build and track your portfolio.
To learn more about the COWZ Pacer US Cash Cows 100 ETF, access our dedicated page now.
FAQ
What is the COWZ ETF?
The COWZ ETF, also known as the Pacer U.S. Cash Cows 100 ETF, is an exchange-traded fund that aims to track the total return performance of the Cash Cow Index. The fund is designed to provide exposure to small-capitalization U.S. companies with high free cash flow yields.
How does the COWZ ETF select its holdings?
The COWZ ETF's holdings are selected based on a rules-based methodology. The initial universe of companies is derived from the S&P Small Cap 600® Index. Companies with available data on their projected free cash flows and earnings over the next two fiscal years are considered. Companies with negative average projected free cash flows or earnings, as well as financial companies (excluding REITs), are excluded.
What is the definition of Free Cash Flow (FCF) Yield used by the COWZ ETF?
The Free Cash Flow (FCF) Yield of a company is calculated as its Free Cash Flow divided by its Enterprise Value (EV). Free Cash Flow is the cash flow from operations minus capital expenditures, and Enterprise Value is the market capitalization plus debt minus cash and cash equivalents.
How are the companies weighted in the COWZ ETF?
The companies included in the COWZ ETF are ranked by their trailing twelve-month Free Cash Flow Yield, and the equity securities of the top 100 companies with the highest Free Cash Flow Yield are included in the Index. Each company's weight in the Index is determined by its trailing twelve-month Free Cash Flow, with a cap of 2% of the total weight of the Index for any individual company.
How often does the COWZ ETF rebalance its holdings?
The COWZ ETF is reconstituted and rebalanced quarterly, with rebalancing taking place at the close of business on the 3rd Friday of March, June, September, and December. Data as of the 2nd Friday of the applicable rebalance month is used.