An International ETF For Cash-Hoarding Companies

Markets Benzinga

Last week, TrimTabs Asset Management brought back to life the Trim Tabs Float Shrink ETF (BATS: TTAC).

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TTAC is primarily focused on generating long-term gains that exceed those of the Russell 3000 Index. It does so by selecting approximately 100 companies that are both generating free cash flow and reducing their share count without the use of leverage, according to a statement issued by TrimTabs.

However, TTAC is not the only exchange traded fund in the TrimTabs stable. The TrimTabs International Free-Cash-Flow ETF (FCFI) is the firm's other ETF and one investors seeking international exposure should not overlook.

FCFI, which debuted in June 2015, can hold stocks from Canada, Germany, United Kingdom, Hong Kong, Japan, France, Switzerland, Netherlands, South Korea, and Australia. Those countries are equally weighted at 10 percent apiece within FCFI's lineup.

Since free cash flow yield is a metric derived directly from a companys cash flow, it is an excellent indicator of a companys profitability. A high free cash flow yield indicates correspondingly high profitability, and the stocks of highly profitable companies in turn tend to generate higher returns, potentially providing greater investment performance, according to TrimTabs.

FCFI allocates 37 percent of its weight to financial services stocks while industrial and consumer discretionary names combine for 34 percent of the ETF's weight.

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FCFI does not trade heavy volume on a regular basis, averaging only about 600 shares per day on a three-month trailing period, but on a simple chart we do see occasional days where several times that amount trades in one session, which is likely investment managers and/or retail investors taking positions in the product, said Street One Financial Vice President Paul Weisbruch in a recent note.

There is something to FCFI's methodology and it indicates the ETF could be a suitable alternative to traditional developed market strategies. Year-to-date, the ETF is up 3.4 percent compared to a gain of 0.7 percent for the MSCI EAFE Index.

Of course volume can change in time as well, especially with products such as this, which are relatively new to the marketplace, It takes time for a live track record of performance to be built, after all, adds Weisbruch.

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