The VictoryShares Free Cash Flow ETF (VFLO ) was met with interesting changes to its portfolio following its reconstitution at the end of the fourth quarter.
VFLO provides exposure to quality companies with high free cash flow (FCF) yields currently trading at a discount. VFLO seeks to track the Victory U.S. Large Cap Free Cash Flow Index (the Index).
Following the ETF’s December 2024 reconstitution, VFLO’s largest sector exposure by weight is health care, followed by energy, consumer discretionary, and information technology.
Sector exposures that increased include health care, energy, consumer discretionary, materials, and communication services. Conversely, its exposure to information technology, industrials, and utilities declined.
VFLO has no exposure to real estate, consumer staples, or financials. The Index’s lack of inclusion of financials and real estate is important because FCF may not be an applicable metric for companies within those sectors.
Holdings Shifted as New FCF Leaders Emerged
Following the reconstitution, the top 10 holdings in VFLO changed. Notably, several new FCF leaders were added. Key changes include the addition of General Motors Company, Gilead Sciences Inc., and Pfizer Inc., which are now the top 10 holdings by weight as of December 23, 2024.
AppLovin Corp, Vistra Corp, and Booking Holdings Inc. were previously among the top 10 holdings but were dropped from the Index during the reconstitution. VFLO weights securities in the portfolio based on their FCF yield.
Why FCF Is an Important Metric for Evaluating Companies
VFLO is a unique large-cap ETF focusing on companies with attractive FCF yields and high expected growth rates.
FCF represents the cash a company generates after accounting for cash payments to support operations and maintain its capital assets. It allows companies to reinvest cash, pay dividends, or pay off debt. FCF can be used to evaluate companies and investment opportunities.
Strong FCF generation is an indicator of a company’s financial strength. Furthermore, companies with strong FCF tend to exhibit higher quality and lower valuations.
For more news, information, and analysis, visit the Free Cash Flow Channel
VettaFi LLC (“VettaFi”) is the index provider for VFLO, for which it receives an index licensing fee. However, VFLO 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 VFLO.
Disclosure Information
Carefully consider a fund’s investment objectives, risks, charges, and expenses before investing. To obtain a prospectus or summary prospectus containing this and other important information, visit http://www.vcm.com/prospectus. Read it carefully before investing.
All investing involves risk, including the potential loss of principal. Please note that the Fund is a new ETF with a limited history. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. Redemptions are limited, and commissions are often charged on each trade. ETFs may trade at a premium or discount to their net asset value. The Fund invests in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index. Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions.
The Fund could also be affected by company-specific factors that could jeopardize the generation of free cash flow. Large shareholders, including other funds advised by the Adviser, may own a substantial amount of the Fund’s shares. The actions of large shareholders, including large inflows or outflows, may adversely affect other shareholders, including potentially increasing capital gains. The value of your investment is also subject to geopolitical risks such as wars, terrorism, environmental disasters, and public health crises; the risk of technology malfunctions or disruptions; and the responses to such events by governments and/or individual companies.
Additional Information
The Victory U.S. Large Cap Free Cash Flow Index aims to select high quality companies from its starting universe by applying profitability screens. It then selects companies with the strongest free cash flow yield that exhibit higher growth. The Index is rebalanced and reconstituted quarterly. This Index calculates free cash flow yield by dividing expected free cash flow by enterprise value. Expected free cash flow is the average of trailing 12-month FCF and next 12-month forward free cash flow. Enterprise value (EV) measures a company’s total value, often used as a more comprehensive alternative to equity market capitalization.
VictoryShares ETFs distributed by Victory Capital Services, Inc. (VCS), an affiliate of Victory Capital Management Inc. (VCM). Neither VCS nor VCM are affiliated with VettaFi.
20250303-4283315
