Cashing In on Small Caps 

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

Small-cap stocks are not to be overlooked, especially when they are packed into an exchange-traded fund (ETF) that works differently than others.

Advertisement.

This particular ETF is Pacer US Small Cap Cash Cows 100 ETF (CALF). CALF gives investors access to the U.S. small-cap arena, but its methodology is a bit different than other funds, since it focuses on free cash flow and how to use it to maximize returns.

Using the S&P Small Cap 600 Index, the ETF screens out financial companies, except for real estate investment trusts (REITs). The rest of the holdings are mostly consumer cyclicals. 

After that first filtering process, CALF then ranks the remaining companies by their trailing 12-month free-cash-flow yield, takes the top 100 companies from that pool and weights them by their trailing free cash flow yield. The weighting for each of the companies within the ETF is capped at 2%.

Advertisement.

CALF’s free-cash-flow strategy aims to provide long-term capital appreciation. Using free-cash-flow yield to measure the sustainability of a company may produce potentially higher returns and more appealing upside/downside capture over time.

As you can see from the chart below, CALF has seen quite a bit of activity throughout the year. However, for each dip it has seen, it’s seen an equal or higher spike. The ETF plummeted in mid-September but within three months rebounded and is continuing to climb. 

CALF has $1.41 billion in net assets and a 3.12% distribution yield. It is currently sitting comfortably near the high end of its 52-week range.

Advertisement.

The fund’s top 10 holdings include Atlas Air Worldwide Holdings Inc. (AAWW), 3.07%; Sonic Automotive Inc. Class A (SAH), 2.51%; Academy Sports and Outdoors Inc. Ordinary Shares (ASO), 2.36%; Abercrombie & Fitch Co. Class A (ANF), 2.19%; Signet Jewelers Ltd. (SIG), 2.13%; Meredith Corp. (MDP), 2.11%; AMC Networks Inc. A (AMCX), 2.09%; Vir Biotechnology Inc. (VIR), 2.07%; Select Medical Holdings Corp. (SEM), 2.06%; and Mueller Industries Inc. (MLI), 2.04%.

Exclusive  George Gilder Discusses Blockchain, the Graphene Age and More in Interview on NYSE Floor

CALF is a unique ETF with a focus on small-cap stocks that generate high free cash flow. Further, the fund offers investors exposure to opportunities in the market where high-quality stocks are trading at a discount.

While CALF does provide an investor with a way to invest in small-cap stocks, using a unique strategy, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

share on:

Like This Article?
Now Get Jim's FREE Special Report:
The Top 11 Dividend ETFs to
Buy Right Now

Get up to 5X the yields of traditional income plays.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE