COWZ: Focus On High FCF Yields A Winning Strategy For This New ETF

So many of the new ETFs that were opened in 2016 focused on narrow segments of the market. We saw new funds such as the 3D Printing ETF (BATS:PRNT), the Wearable Technologies ETF (BATS:WEAR) and the Global X S&P 500 Catholic Values Index ETF (NASDAQ:CATH). And that's not even mentioning the myriad of smart beta funds that have also launched recently. I'm not suggesting that any of these are poor funds by any stretch. I actually like a number of them and think they have solid management teams backing them up but how do some of these funds fit into a portfolio? How much portfolio capital really needs to be dedicated to liquor producers and drones?

So I was pleasantly surprised to find a new ETF launch last month that focused on fundamentals instead of niche markets. The Pacer US Cash Cows 100 ETF (BATS:COWZ) targets the 100 companies from the Russell 1000 index that deliver the highest free cash flow yields. By focusing on cash rich companies, you've got a portfolio of names that have a great deal of flexibility to both target growth opportunities and return capital to shareholders in the form of dividends and buybacks.

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