Weakness in FCF US Quality ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy receives a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And momentum exposure is rooted in holding stocks currently on a winning streak. The strategy suffers from its inexperienced portfolio management team. This largely drives the strategy's Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like a favorable lineup success ratio and a successful risk-adjusted track record. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Apple

Alphabet

AbbVie

Merck

QUALCOMM

Visa

American Express

Mastercard

Accenture Plc

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. FCF US Quality ETF earns a Below Average Process Pillar rating. 

The process benefits from the parent firm's five-year risk-adjusted success ratio of 100%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. However, the rating is weakened by the fund's unimpressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. Management team experience, which averages three years at this fund, also weakens the process.

 This strategy leans toward smaller, more growth-oriented companies than its average peer in the Large Blend Morningstar Category. Examining additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also demonstrated more exposure to high-momentum stocks over peers in recent years. Momentum is based on the premise that stocks that have recently outperformed will continue to outperform, and those that have underperformed will stay behind. Compared with category peers, the strategy also had more exposure to the Momentum factor in the most recent month. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in technology by 13.4 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are financial services and consumer defensive, underweight the average by 5.4 and 2.9 percentage points of assets, respectively. The portfolio is positioned across 157 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 26.8% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category average's 48.8%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 39% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

FCF US Quality ETF earns a Below Average People Pillar rating. The team is bolstered by its parent firm's five-year success ratio of 100%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. However, the rating is held back by the turnover of management across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers. Management team experience, which averages three years at this fund, also detracts from the team.

People

FCF Funds has some investor-friendly attributes, but other attributes warrant caution, leading to an Average Parent Pillar rating. Longevity at the firm has been impressive. Its five-year risk-adjusted success ratio is 100%, meaning that 100% of the products have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. FCF Funds's risk-adjusted performance compares similarly to competitors. Across its open-end and exchange-traded funds, the firm’s average five-year Morningstar Rating is 3.5 stars, which is about standard. A notable weakness of FCF Funds is the inexperience of its longest-tenured managers compared with other asset managers. Managing capital through a full market cycle is a challenging prospect for seasoned managers, but with only three years of average tenure across their management team, there is cause for concern.

Average

Parent

FCF US Quality ETF

TTAC aims to outperform a broad US equity index. The actively-managed fund selects stocks based on strong free cash flow and ESG rankings.

The recent collapse of Silicon Valley Bank and Signature Bank has made investors nervous and has led to massive bank runs, the fall of many banking stocks, and increased market volatility.

Why TTAC Has No Exposure to Banks

FCF US Quality ETF (TTAC) holding Ovintiv generated record free cash flow in what president and CEO Brendan McCracken called “a milestone year” for the Denver-based hydrocarbon exploration and production company. The company generated $2.3 billion of free cash flow in 2022, up from the $1.7 billion generated in 2021.

Ovintiv Generates Record Free Cash Flow in “Milestone Year”

After the sudden collapse of Silicon Valley Bank and now Signature Bank, things are looking a little bit rough for the banking sector.

Seek Free Cash Flow Amid Banking Failures

Occidental Petroleum announced a $3 billion share repurchase program thanks to its “record free cash flow” last year, according to President and CEO Vicki Hollub.

Occidental Buys Back Shares With Record Free Cash Flow

FCF International Quality ETF

Many analysts believed that the Federal Reserve was nearing the end of its rate hike cycle, as inflation was coming down and the U.S. central bank's latest interest rate increase of 25 basis points was far less aggressive than previous rate hikes.

Target Free Cash Flow as Fed Signals More Rate Hikes

United Parcel Service (UPS) is flush with free cash flow. The shipping, receiving, and supply chain management company reported that it generated $9 billion of free cash flow in 2022, which handily covered the $5.1 billion it distributed in dividends.

UPS Has Ample Free Cash Flow to Pay Out Dividends

Sylvamo (NYSE: SLVM), aka “the world's paper company,” delivered strong free cash flow “despite global supply chain challenges and unprecedented input cost inflation,” said Chairman and CEO Jean-Michel Ribiéras during the company's earnings call.

TTAC Holding Sylvamo Reports Strong Free Cash Flow for 2022

IBM's free cash flow is on the rise. The tech giant reported that it generated $9.3 billion of free cash flow in 2022, an increase of $2.8 billion from 2021.

Capitalize on IBM's Growing Free Cash Flow Through TTAC

ExxonMobil (XOM) announced in its full-year 2022 results that its annual free cash flow reached $62.1 billion in 2022, an increase of nearly $23 billion, or 64%, from 2021. Meanwhile, ExxonMobil's cash flow from operating activities was nearly $77 billion for the year, up nearly $29 billion, or 60%, from 2021.

ExxonMobil Ends 2022 Flush With Free Cash Flow

Stocks tumbled on Monday as investors wait to see how several big tech firms fared for the final quarter of 2022. This week, Facebook parent Meta Platforms, Apple, Amazon, and Google parent Alphabet are set to report their quarterly earnings.

Focus on Free Cash Flow Over Big Tech Earnings With TTAC

2022 was a tough year to navigate for investors. Sky-high inflation in the U.S. and a land war in Europe led to a bear market both domestically and overseas.

FCF Advisors Sees Deeper Reason for Current Bear Market

Big tech had a rough 2022. While the S&P 500 ended the year down 20%, the tech-heavy Nasdaq Composite dropped 34%, while tech giants like Microsoft, Google parent Alphabet, and Amazon saw their stock prices fall 28%, 39%, and 51% for the year, respectively.

TTAC Underweight Big Tech as it Follows the Free Cash Flow

Free cash flow is the cash generated by a company through its operations after accounting for capital expenditure on fixed assets. FCF Advisors has been focused on free cash flow investment strategies since 2011 and specializes in multi-factor fundamental analysis grounded in decades of research.

Under the Hood of TTAC

While tech giants like Apple (NASDAQ: AAPL) and Google parent Alphabet (NASDAQ: GOOGL) have seen their stocks go down by 27% and 39% year-to-date, both companies have used their ample free cash flow to finance their stock repurchasing programs.

Apple and Alphabet Implement Massive Share Buyback Programs

TTAC has a well-designed investment strategy amalgamating quality assessed via the proprietary FCF model and ESG considerations. It has shown resilience this year, remaining ahead of IWV and IVV for now, thus partly proving the point that quality-heavy portfolios should do better in the higher rates environment.

TTAC: There Is Something To Dislike About This FCF Strategy

While the Federal Reserve just raised interest rates by 50 basis points following an upbeat inflation report, many still believe that a recession is nigh — if not already upon us. Economists polled by Reuters expect the U.S. economy to head into a “short and shallow recession” over the next year.

Target Firms With Strong Free Cash Flow Before a Recession Hits

Amgen has agreed to buy Horizon Therapeutics in a deal valued at $27.8 billion. The Thousand Oak, California-based biopharmaceutical company announced on Monday that it will pay $116.50 in cash for each share of Horizon.

How Amgen Buying Horizon Therapeutics Could Impact TTAC

Core equity markets have been volatile this year, with the S&P 500 down nearly 18% year-to-date. To make matters worse, many industry observers believe that stocks may face a recession within the next six to 12 months.

Maintain Core Equity Exposure Amid High Volatility With TTAC

A number of large-cap companies have posted lackluster earnings after dealing with inflation, supply-chain issues, and broad economic uncertainty. Added to that, “the strong U.S. dollar emerged as a significant negative earnings factor that weighed on the profitability of all companies with big international operations,” wrote Sheraz Mian for Zacks.

Target Free Cash Flow as Companies Report Lackluster Earnings

While stocks have rallied in recent weeks, we're not out of the woods yet. According to Goldman Sachs strategist Peter Oppenheimer, stocks are still in bear country.

Seek Free Cash Flow While Markets Remain in Bear Country

Sometimes, bold contrarian calls can be more bold than profitable, but when an active manager gets it right, the results can really pay off. One such success story lies with the FCF US Quality ETF (TTAC).

How TTAC Underweighted Mega-Caps and Beat the S&P 500

Investors may be on the lookout for a quality growth ETF this fall, given the likes of Alphabet Inc. (GOOGL), Meta Inc. (META), and Amazon Inc. (AMZN) all falling more than 35% YTD.

Look to TTAC for Quality Growth ETF

VettaFi's vice chairman Tom Lydon discussed the FCF US Quality ETF (TTAC) on this week's “ETF of the Week” podcast with Chuck Jaffe of “Money Life.” Free cash flow is the key ingredient to TTAC.

ETF of the Week: FCF US Quality ETF (TTAC)

While Google parent Alphabet reported lackluster earnings after the closing bell on Tuesday, the tech giant did report strong free cash flow for Q3. Alphabet reported more than $16 billion in free cash flow for the quarter that ended September 30.

TTAC Takes Advantage of Google's Free Cash Flow

Shares of Exxon Mobil Corp. rallied Wednesday morning after Jefferies upgraded the energy giant's stock to “buy” from “hold.” Part of the upgrade was driven by expectations that the company will maintain strong free cash flow generation through 2027.

News for FCF US Quality ETF ETF (TTAC)