When investors want to build an ETF portfolio of growth, profitability, and momentum, it could mean having to own three different funds that address these factors individually. That’s not the case when it comes to the VictoryShares Free Cash Flow Growth ETF (GFLW ). This ETF does the three-factor exposure hat trick in the convenience of one fund.
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Performance Beyond Growth
By focusing on companies that generate robust free cash flow (FCF), GFLW is able to screen for high-quality firms capable of self-funding their expansion, resulting in a growth profile that significantly outpaces traditional benchmarks. Powering the fund is the Victory Free Cash Flow Growth Index (the “Index”). As shown in the chart below, the design of the Index allows GFLW to excel where other strategies falter, specifically by maintaining high-factor exposures relative to the S&P 500 Index.
The Index demonstrates a strong growth factor value of 0.58, which outpaces the 0.35 in the Russell 1000 Growth Index and the 0.19 measured for the NASDAQ 100 Index. It also maintains a profitability factor value of 0.20, beating out the MSCI USA Sector Neutral Quality Index. Lastly, it achieves a momentum value of 0.34, exhibiting a greater momentum profile than the NASDAQ 100 Index.
Ultimately, this Index offers a strategic solution for those looking to build a growth-oriented portfolio without sacrificing the stability provided by profitability or the performance tailwinds associated with positive momentum.
How Does GFLW Do It?
The Index uses a discerning screening methodology that builds a high-conviction portfolio of companies based on their FCF relative to return on invested capital (ROIC). The Index starts with 1,000 companies in the VettaFi 1000 US Large Cap Index, and narrows the field down to 400 using a rules-based methodology that screens for positive FCF growth over the last five years.
Of the 400, 150 securities are chosen according to profitability metrics, namely those exhibiting the highest FCF return on invested capital. A growth overlay filters out the slowest-growing companies, leaving 100 stocks based on strong FCF characteristics. This includes favorable forward 12-month FCF rather than relying on 12-month trailing data.
The Index is reconstituted and rebalanced quarterly, excluding companies with negative FCF. In the end, investors are left with companies that exhibit strong, sustainable cash generation, which may enhance portfolio resilience while positioning clients for potential long-term growth, profitability, and momentum.
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VettaFi LLC (“VettaFi”) is the index provider for GFLW, for which it receives an index licensing fee. However, GFLW is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GFLW.
