Since the beginning of 2022, growth shares from S&P 500 far behind value stocks: −5% vs. +1,2%. Expecting a rate hike FED, investors are shifting from overvalued companies to more reliable ones. For example, in "cash cows".
What are "cows"?
Cash Cows - Companies from the Pacer US Cash Cows Fund. This fund includes 100 companies from the index Russell 1000 with the highest free cash flow yield in recent 12 Months.
That's what it all means.
Russell 1000 — an index of the 1000 largest US companies by capitalization. It accounts for 92% total capitalization of the US stock market.
free cash flow, or FCF, — the difference between operating cash flow from core activities and capital expenditures. It's free money, which the company can spend on dividends, share repurchase, takeover or debt repayment.
Free cash flow yield, or FCF yield, — the ratio of free cash flow to capitalization in percent. Attitude helps to assess the value of the company through free money, which it generates.
Considering the principle of formation, for Pacer US Cash Cows Value Investor ETF looks more attractive, than ETFs on major stock indices. Compared to Russell 1000, capitalization to earnings ratio, or P / E, at the "money cows" below, and the dividend yield is higher.
Indicators according to 31 December 2021
|"Money Cows"||Russell 1000|
|P / E||10,52||24,83|
And what about income?
In recent months, investors feared the tightening of the Fed's policy, dump expensive growth stocks and buy cheaper value stocks. So, in the last 6-12 months, "cash cows" showed twice the profitability, than Russell 1000 and S&P 500. Since the beginning of the year, the fund has also been outperforming major stock indices..
Yield including dividends according to 18 January 2022
|"Money Cows" (COWZ)||Russell 1000 (IWB)||S&P 500 (IVV)|
The composition of the "cows"
Since the fund is not available to Russian investors without the status of a qualifier or an account with a foreign broker, it can be repeated - in whole or in part.
The current composition of the fund can be viewed on the website of the provider Pacer ETFs. There is an excel spreadsheet with the names, tickers and weight, which companies hold in the fund.
There are no other interesting data in the table, therefore, it will be more convenient to study individual companies on some aggregator site. For example, you can copy the ticker column to the screener Finviz and sort by any of the parameters.
Capitalization of the largest "cows", billion dollars
|Exxon Mobil (XOM)||299|
"Cows" with the lowest ratio of capitalization to sales, or P / S
|Company||P / S|
P / S
Cows with the highest dividend yield
|Antero Modstream (AM)||8,4%|
|Exxon Mobil (XOM)||4,9%|