There is a lot of uncertainty in the markets given changes in fiscal and monetary policy. To start the year, investors have turned to companies with strong financial profiles. ConocoPhilips, Qualcomm, Royalty Pharma, and Scorpio Tankers are a few examples. These are companies with high free cash flow yields and growth traits. They are also constituents in two ETFs from Victory Capital that have kicked off 2025 with a bang.
VFLO Hits $2 Billion
The VictoryShares Free Cash Flow ETF (VFLO ) just crossed the $2 billion asset mark. This is impressive as the ETF will turn two years old in June 2025. The fund’s strong performance has helped it to gain a following. VFLO was up 22% in 2024, outpacing the 14% gain for the market-cap weighted Russell 1000 Value index. Year-to-date through January 16, VFLO was up 4.7%, outpacing the benchmark by 200 basis points.
VFLO offers exposure to high-quality, large-cap stocks that trade at a discount and have favorable growth prospects. The fund’s index methodology considers a company’s trailing and expected free cash flow. ConocoPhillips and Qualcomm are a pair of its larger holdings. Relative to the Russell 1000 Value index, VFLO has lower price-to-book and trailing price-to-earnings ratio, but a higher return on equity.
The forward-looking ETF was overweighted to consumer discretionary, and energy stocks, but underweighted to industrials and had no exposure to consumer staples.
SFLO's Milestone
Meanwhile, the VictoryShares Small Cap Free Cash Flow ETF (SFLO ) just passed the $200 million mark, The fund takes a similar approach to its large-cap sibling but for less established companies. SFLO’s weighted average market capitalization was recently $3.9 billion, compared to VFLO’s $79 billion. Royalty Pharma and Scorpio Tankers are a couple of its recent top-10 holdings.
Small-cap SFLO launched in December 2023. In its first full calendar year, SFLO rose 6.5%. The was behind the 8.1% for the Russell 2000 Value index. However, to start 2025 SFLO was up 4.8%, ahead of the cap-weighted index’s 1.3%.
Relative to the Russell 2000 Value, SFLO recently had a modestly higher price-to-book ratio, significantly lower P/E ratio and a significantly stronger return on equity. Consumer discretionary and energy stocks were also favored by SFLO, while the fund had significantly less exposure to financials than the Russell index.
Congratulations to VictoryShares and their shareholders on a strong start to 2025.
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VettaFi LLC (“VettaFi”) is the index provider for VFLO and SFLO, for which it receives an index licensing fee. However, VFLO and SFLO are 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 and SFLO.
