Assess CFLO
Dear MM, Could I get your assessment of this new ETF: CFLO. It's only small but it invests in large international companies with robust cash flows. Is it worth a punt ? thx John.
The Latest Q&A
Answer
Hi John,
Arguably a contradictory comment “punt” when investing in “large international companies with robust cash flows”. The top holdings of this ETF are largely as one would expect:
- Microsoft, Adobe, Visa, United Health, Costco, Alphabet, Novo Nordish and Cisco Systems.
At this stage as an aggressive play for exposure to short term moves into 2024 we prefer the US small caps or large cap tech names. In general we regard the CFLO ETF as a quality end play on the S&P500 although as Cisco showed on Thursday night there are risks in all pockets of the market.
The other consideration here is that ETF providers are morphing from index trackers, which is their bread and butter into more traditional fund managers employing a specific strategy, which is what this ETF does. It says it targets global companies that demonstrate strong and consistent free cash flow generation, growth of free cash flow, and relatively low levels of debt – sounds like a more traditional fund manager than an index tracking ETF. At MM, we are big believers in sticking to a core approach, doing what we are good at, and this is an example of a passive index manager becoming what they sort to displace in the first instance.
- At MM we prefer our stock picking approach to add value/alpha to a portfolio rather than backing an ETF provider to run an investment strategy outside of their core competencies.
