DFNV comes from TrimTabs Asset Management, a brand-name ETF suite from Free Cash Flow Advisors that employs its proprietary free cash flow profitability analysis. The issuer believes that free cash flow has more to tell about a firm’s prospects than earnings alone, given how companies report their revenues and how expenses can affect earnings-based models.
DFNV came to market in the middle of the pandemic, geared towards investors looking to the future in the middle of a period of remarkable economic and societal instability. The ETF invests in all-cap equities that exhibit strong free cash flow and innovation, tracking the FCF Risk Managed Quality Innovation Index.
The ETF then takes the top 25% of the eligible universe and invests based on R&D investment and profits, assets turnover, and financial leverage. DFNV selects up to 120 names and then crucially adds a downside hedge in bear markets via U.S. Treasury strategies, investing up to 50% of its assets in said Treasury funds and other cash equivalents based on daily buy-sell signals.
The strategy currently holds four Treasury ETFs as its top four holdings with about 50% of its weight, providing ample cover in a complicated environment and also allowing investors to feel confident in its innovation-focused equities. DFNV leads off with Apple (AAPL), Eli Lilly (LL), and Johnson & Johnson (JJC) combined at around 3.5% weight for its equities.
DFNV has seen an increase in net inflows of about $25 million in the last month compared to over the last three months, with its performance increasing in turn by between its one-month and three-month return periods.
With markets still uncertain amid the prospect of a recession still in the cards, investors looking for an innovation risk ETF may want to follow DFNV moving towards the end of a raucous 2022.
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