VictoryShares Free Cash Flow ETF

VFLO

Valor de mercado US$ 11,7 bi

Ray Dalio warns that rising bond yields could pressure stocks. Explore five cash-flow-focused ETFs to identify financially resilient companies.

VictoryShares Free Cash Flow ETF remains a Buy, but I downgrade it from Strong Buy due to increased cyclical risks and slower expected returns. VFLO's portfolio has shifted from defensive names to heavier exposure in AI infrastructure, energy, and materials, increasing sensitivity to cyclical swings. The ETF's methodology—favoring high FCF yield—successfully captured recent rallies but now faces higher risk from potential multiple compression in memory and energy plays.

VictoryShares Free Cash Flow ETF (VFLO) and Capital Group Dividend Value ETF (CGDV) offer complementary exposure with minimal portfolio overlap. VFLO currently presents a stronger value proposition, with a lower average P/E (15.8x) and greater alignment to AI and memory sector tailwinds. CGDV provides diversified mega-cap, dividend-focused exposure and remains a high-quality core holding despite recent underperformance versus VFLO.

This week, I appeared on Schwab TV for the New York Stock Exchange. Here's a brief recap.

When investors think of value-oriented equity strategies, they may anticipate sacrificing growth in exchange for companies exhibiting lower valuations. However, the VictoryShares Free Cash Flow ETF (VFLO) challenges this narrative.

When it comes to identifying value, typical fundamental metrics like price-to-earnings (P/E) or price-to-book (P/B) are often used. Both metrics rest on accounting outputs (reported earnings and book value), and accounting rules allow significant discretion in non-cash expenses, depreciation schedules and goodwill write-downs.

There is a myth that index-based ETFs are all static buy-and-hold products that passively track a benchmark. Many people think of indexing through the lens of market-cap strategies like the Vanguard S&P 500 ETF (VOO).

Large-cap valuations continue to stretch toward unprecedented levels, which makes it difficult for traditional accounting-based metrics to locate true value. The VictoryShares Free Cash Flow ETF (VFLO) addresses this challenge by tracking the Victory U.S. Large Cap Free Cash Flow Index.

Pacer US Cash Cows 100 ETF is rated 'hold' due to inferior growth and quality metrics versus VFLO, despite similar free cash flow yields. COWZ's strategy relies on historical free cash flows and lacks forward-looking growth screens, resulting in inconsistent portfolio-level growth rates and performance. VFLO's inclusion of expected free cash flow and an explicit growth screen leads to superior and more consistent fundamental balance. It also has substantially outperformed COWZ since its inception.

Despite fears that artificial intelligence (AI) will disrupt the software-as-a-service (SaaS) business model, the approach of VFLO's Index, centered on a free cash flow (FCF) screen, shows that mature software leaders like Adobe (ADBE), Salesforce (CRM), and Intuit (INTU) have been generating strong FCF.