TrimTabs Asset Management (TTAM), a New York City-based investment manager focused on free cash flow-centric strategies, has launched the TrimTabs All Cap International Free-Cash-Flow ETF, TTAI.
TAI is the second free cash flow-centric ETF to be added to the TrimTabs lineup, after TTAC, the TrimTabs Float Shrink ETF, which focuses on domestic companies generating strong free cash flow and reducing share counts.
With TTAI, TrimTabs is bringing its algorithmic approach to the international free cash flow area. “We’re thrilled to be able to expand our free cash flow offerings to encompass non-US based companies as well,” says Charles Biderman, Founder of TrimTabs Asset Management. “When used in conjunction with one another, TTAI and TTAC will allow investors to customize their domestic and international free cash flow exposure, all within one product suite.”
“The proprietary algorithm is the engine that drives the whole investment process, and we are now able to survey all global equities to find those that meet our criteria,” says Ted Theodore (pictured), Chief Investment Officer at TrimTabs Asset Management.
TTAI is primarily focused on generating long-term gains that exceed those of the S&P Developed Ex-US Index. It does so by selecting approximately 85 companies in non-US developed markets—including Europe, Asia, South Asia, and Canada—that are both generating free cash flow, reducing their share count without the use of leverage, and maintaining healthy balance sheets.
“Free cash flow is an extremely powerful, useful metric when it comes to evaluating a company,” Biderman adds, “which is why it’s integral to TTAI’s methodology.”
The firm writes that while managements have enormous discretion in how they report sales, earnings, assets, and liabilities, free cash flow is significantly less likely to be subject to some of the financial gimmickry inherent in much of today’s accounting practices. It enables closer scrutiny of underlying corporate fundamentals, making it easier to identify quality companies with growing cash reserves.
Another pillar of TTAI’s investment methodology is a focus on share reductions. Companies execute share reductions by lowering the amount of shares outstanding, most commonly through stock buybacks, though this can also be accomplished with other corporate actions. This can prove advantageous for investors holding the stock in question, as they end up holding a ‘larger piece of the pie’. TrimTabs takes an extra step by ensuring that companies executing buybacks are only doing so with free cash flow, not through additional leverage.
The Fund’s expense ratio is 0.59 per cent, which is less than the average of what other actively managed international ETFs charge based on the average fee of its peer group, the firm says. “As an actively managed ETF, TTAI offers investors the potential to achieve ‘alpha,’ while maintaining low fees.”
