ACWI - GCOW: A Big Energy Sector Bet Looks Less Risky Today (Rating Upgrade)

2024-03-19 16:10:02 ET

Summary

• High free cash flow stocks have produced negative alpha since Q3 last year, contradicting the sentiment favoring them.
• Pacer Global Cash Cows Dividend ETF has underperformed the S&P 500 and All-Country World Index over the past year, but emerging strength in the Energy sector would benefit the cyclical fund.
• The GCOW ETF has grown in assets over the past two years, and I highlight one key technical price point both the bulls and bears should monitor.

There’s a lot of chatter and many compelling narratives surrounding the importance of free cash flow generation in this era of higher interest rates. Firms that can produce real profits available to shareholders in the here and now are purported to be solid investment candidates. Unfortunately, reality has not matched overall sentiment in favor of the high free cash flow factor. According to Goldman Sachs’ latest weekly report, high vs. low adjusted FCF stocks have produced negative alpha since Q3 last year. ...

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