VictoryShares Free Cash Flow ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy gets an Average Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Exxon Mobil

Cigna

Centene

Chevron

Elevance Health Inc

Lennar

NRG Energy

Vistra Energy

QUALCOMM

CVS Health

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Victoryshares Free Cash Flow ETF earns an Average Process Pillar rating. 

The leading factor in the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. A reasonable level of diversification across individual securities also supports the process. The fund's top 10 holdings account for 31% of assets. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 48%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy prefers smaller market-cap firms compared with the average fund in its peer group, the Large Value Morningstar Category.  But in terms of investment style, it is on par with peers. Looking at additional factor exposure, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in the past few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. Such holdings could cause it to trail peers during economic booms, but help it better withstand busts. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This contributes to a higher-risk, higher-reward approach. 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 energy and consumer cyclical relative to the category average by 16.5 and 10.3 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and consumer defensive, underweight the average by 19.8 and 6.3 percentage points of assets, respectively. The portfolio is composed of 52 holdings and is relatively concentrated. In particular, 31.5% of the strategy's assets are housed within the top 10 holdings, compared with the category’s 27.4% average.

Average

Process

Victory Capital’s team is good but unexceptional, earning the strategy an Average People Pillar rating. There are two managers listed on the fund: Mannik Dhillon, Lance Humphrey. Together, they manage a total of seven strategies, with an asset-weighted average Morningstar Medalist Rating of Neutral. This means, in aggregate, the team falls short and will struggle to produce positive alpha relative to the category median.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

As Victory Capital Management expands a roster of investment teams that runs the gamut,  it retains an Average Parent rating.

Victory operates a multiaffiliate model. It centralizes operations, compliance, and distribution while giving its 12 franchises investment autonomy. The franchise lineup had long been composed of those primarily focused on small/mid-cap equities. But the 2019 acquisition of fixed-income shop USAA Investments (which was rebranded as Victory Income Investors in April 2023) represented a significant change to that model. The firm has continued to broaden from there, acquiring three new franchises since the start of 2021: THB Asset Management (an environmental, social, and governance specialist), New Energy Capital (an alternatives manager), and WestEnd Advisors (a third-party model strategist). Overall, Victory is as big and diverse as ever: Its assets under management as of March 2023 was $157.6 billion, much higher than the $52.8 billion level as of December 2018.

Victory’s bright spots include Sycamore Capital and Trivalent Investments, which boast strong investment cultures, good levels of manager ownership, and solid capacity management processes. But there are questions elsewhere. Victory Capital Solutions has made some questionable subadvisor changes and dubious exchange-traded fund launches in recent years; Victory Income Investors has seen several departures since the 2019 acquisition and will absorb another franchise, Incore, in September 2023.

Parent

VictoryShares Free Cash Flow ETF

VFLO tracks an index composed of the largest U.S. companies based on profit that are perceived to have strong free cash flow yields and high growth metrics.

Brookfield Renewable Partners

Canadian Natural Resources

Enbridge

Enterprise Products Partners

IonQ

JPMorgan Equity Premium Income ETF

Lithium Americas Corp

Defiance Nasdaq 100 Enhanced Options Income ETF

QuantumScape

Solventum Corporation

Tilray Brands

The "Undercovered" Dozen highlights twelve ideas from the previous month on stocks with limited coverage. QuantumScape, IonQ, Enbridge preferred shares, Tilray, and more are included this month.

The 'Undercovered' Dozen From April 2024

VFLO is a relatively new FCF Yield ETF with assets under management of $300 million. The first alternative to COWZ, VFLO distinguishes itself by incorporating estimated FCF into the process. With quarterly reconstitutions and only 50 stocks selected, investors should expect high turnover and poor diversification. Currently, 92% of the portfolio is allocated to just five sectors. The benefits include an attractive set of fundamentals, including a 13.27x forward P/E, double-digit free cash flow margins, and at least temporarily, strong momentum.

VFLO: Reconstitution Update, New Factor Mix For This Growing FCF Yield ETF

VictoryShares Small Cap Free Cash Flow ETF

Utilizing factors as part of an investing strategy can potentially enhance diversification, improve returns, and manage risk or volatility. Common style factors include growth, value, quality, momentum, and size.

How Free Cash Flow ETFs Introduce Factors to Portfolios

Amplify Cash Flow Dividend Leaders ETF

Pacer US Cash Cows 100 ETF

Warren Buffett considers free cash flow, or "owner earnings," the truest form of intrinsic value for a company. History has proven him correct. FCF yield (FCF/EV) is the best-performing strategy of the last 33 years, with almost 18% average annual returns or 151X returns vs. 22X for the S&P. FCF yield ETFs are becoming popular with COWZ, COWS, and VFLO now competing for investor interest.

COWZ Vs. COWS Vs. VFLO: Battle For The Future Of Value Investing

VictoryShares' lineup of free cash flow ETFs has seen continued interest among investors. The VictoryShares Free Cash Flow ETF (VFLO) and the VictoryShares Small Cap Free Cash Flow ETF (SFLO) attracted strong interest and healthy flows in February 2024.

Free Cash Flow ETFs See Continued Investor Interest

Investors are continuing to plow assets into the tech sector, leaving many portfolios underexposed to value stocks. Flows remain heavily skewed toward tech at the sector level.

As Tech Sector Sees Massive Flows, Don't Overlook FCF Exposure

The economy appears to be accelerating with consumer expenditures and red hot jobs numbers pushing GDP growth estimates to 2.5% or higher.

VFLO: My Favorite Dividend ETF For Today's Accelerating Economy

FlexShares International Quality Dividend Index Fund

FlexShares International Quality Dividend Dynamic Index Fund

Kodiak Gas Services Inc

Kronos Worldwide

M.D.C. Holdings

Ahead of World Health Day on Apr 7, 2024, we prescribe 3 high-quality ETFs and stocks that may offer you solid gains in the current tumultuous market conditions.

3 High-Quality ETFs & Stocks Prescribed Ahead of Health Day

Amplify Online Retail ETF

Proshares Online Retail ETF

American Century U.S. Quality Growth ETF

On this week's episode of ETF Prime, host Nate Geraci was joined by VettaFi Head of Research Todd Rosenbluth to discuss Fidelity's servicing fee plans and break down polling data from VettaFi's recent Equity Symposium. Afterward, Troop Co-Founder & CEO Felix Tabary joined Geraci to discuss how his company helps asset managers facilitate proxy votes.

ETF Prime: Rosenbluth on VettaFi Polling and More

iShares Russell 1000 ETF

In the past couple of years, ETF-oriented advisors have turned their attention to free cash flow ETFs. Free cash flow is the cash available after a company has paid expenses, interest, taxes and long-term investments.

Focusing on Free Cash Flow ETFs

Amazon

Baxter

British American Tobacco

Comcast

Global Payments

HDFC Bank Limited

Humana

Rexford Industrial Realty

Truist Financial

The market is near record highs and NVDA is up 11 straight weeks. Yet, blue-chip coiled spring bargains are still bountiful. VFLO is the best deep value strategy ETF I've found. A great combo of deep value, quality, and growth. It's beating the S&P, value, and even the Nasdaq since inception. Combining ETFs with individual stocks is a great way to potentially achieve superior returns and yield than ETFs can achieve.

10 Coiled Spring Blue-Chip Bargain Buys

My ZEUS Family fund uses a core of ETFs to manage risk and maximize long-term income growth. COWZ is one of our favorite deep-value ETFs. COWZ uses a valuation metric to deliver strong returns in a growth-obsessed market. But COWZ has several major limitations that VFLO, a newer deep value ETF rival, addresses.

VFLO: 5 Reasons I'm Buying This Dividend ETF For My Retirement Portfolio

Invesco QQQ

Encouraging investors to maintain a diversified portfolio is challenging when one asset class has outperformed the others in recent years. Many investors are hesitant to allocate to value, as many value strategies have lagged in recent history.

Pair VFLO & QQQ to Create an All-Weather Portfolio

Many investors tend to focus on past performance or backward-looking indicators when evaluating a stock's future potential. While a stock's past performance, valuation, or historic cash flow yield can potentially serve as a guide to assessing its future strength, these measures do not provide a comprehensive picture of a security's potential to generate attractive returns.

How Future Free Cash Flow Creates Returns for Investors

In recent years, the energy sector has focused on improving free cash flow generation, unveiling a compelling investment opportunity. Historically, energy companies tended to prioritize growth at the expense of free cash flow (FCF).

Evaluating Free Cash Flow Yields in the Energy Sector

Two key drivers behind a company's value are important for investors to understand. The first driver of value is the company's free cash flow (FCF) yield.

FCF and Growth: Examining the Key Drivers of a Company's Value

Avantis US Large Cap Value ETF

iShares Russell 1000 Value ETF

iShares Russell 2000 Value ETF

Hartford Multifactor US Equity ETF

American Century STOXX U.S. Quality Value ETF

Vanguard Value ETF

Vanguard Growth ETF

Bull vs. Bear is a weekly feature where the VettaFi writers' room takes opposite sides to debate controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play either angle. For this edition of Bull vs.

Bull vs Bear: Is It Time for Value ETFs to Rotate Into Favor?

VictoryShares has two ETFs in its suite offering exposure to companies with attractive free cash flow yields. The VictoryShares Free Cash Flow ETF (VFLO) and the VictoryShares Small Cap Free Cash Flow ETF (SFLO) are constructed using the same innovative methodology, but each provides nuanced exposure to the U.S. market.

VFLO or SFLO: Which Free Cash Flow ETF Is Right for You?

Free cash flow is a useful metric for evaluating companies and investment opportunities. Free cash flow is the remaining cash a company has after accounting for operating expenses and capital expenditures.

What's the Right Way to Assess Free Cash Flow?

VictoryShares' small-cap free cash flow ETF has quickly gained traction with investors. SFLO serves as a potential solution for investors looking to enhance their small-cap exposure and limit the volatility associated with the space.

VictoryShares' Small-Cap Free Cash Flow ETF Enhances Exposure

For the past few years, the energy sector has had high capital expenditures (capex). According to S&P Global, the global energy sector capex was more than $1.5 trillion in 2021[1].

How Energy Is Ready for High Free Cash Flow Yields

VFLO is Victory Capital's answer to COWZ, the most popular free-cash-flow-yield ETF on the market. Since my August review, VFLO has outperformed by 3%. VFLO's use of forward-looking metrics is important. This approach considers new information analysts have about current markets, and although estimates can be flawed, I believe it's a net positive. After last month's reconstitution, VFLO offers nearly the same estimated EBITDA growth as the Russell 1000 but at a fraction of the cost. On paper, VFLO looks great.

VFLO: My Balanced Take On Victory Capital's Free Cash Flow Yield ETF

VictoryShares believes that healthcare companies have the potential to generate high future free cash flow (FCF) yields. From the information available, while concerns are out there, having the right fundamentals in place is ultimately advantageous.

Why Fundamentals for Healthcare Are Strong

When seeking companies that generate high free cash flow (FCF) yields, sectors matter. Take technology, for example.

How the Technology Sector Can Generate High Free Cash Flow Yields

GraniteShares HIPS US High Income ETF

ALPS Medical Breakthroughs ETF

ALPS Sector Dividend Dogs ETF

Many of us were prepping for year-end (or on vacation in Belize, in my case) in December. However, index providers were hard at work to ensure certain ETFs fully reflected the investment criteria advisors have come to expect.

News for VictoryShares Free Cash Flow ETF ETF (VFLO)