A recent white paper by the team at TrimTabs Asset Management urges investors to not only look at the amount of debt a company carries but more importantly the leverage of a company.
“Our research shows that over an extended period, companies with strong balance sheets have historically outperformed those peers that are saddled with relatively high amounts of debt, especially during periods of financial stress,” says portfolio manager Janet Johnston.
TrimTabs Asset Management’s investment approach is to look at a combination of free cash flow and strong balance sheets to create a list of high-quality names.
TrimTabs reports that their actively managed flagship fund: the TrimTabs All Cap US Free-Cash-Flow ETF (TTAC). TTAC was up 40.36 per cent (NAV) since inception until the close of November. Over that same time frame, its benchmark, the Russell 3000 Total Return Index, has returned 32.44 per cent during the same time period.