In short: ETF of the Month. "The ETF invests in large companies in the United States with a specific set of characteristics: High Free Cash Flow Yield; Strong forward growth." The construction is a two-step filter on the VettaFi US Large Cap Free Cash Flow Index — "Value: it finds companies generating the most free cash flow relative to their enterprise value; Growth: it screens out companies with the lowest expected growth." The rationale is the twin-engine argument packaged as a rule: "buying the cheapest companies with the highest expected growth gives us the best chance to let our two favorite return engines work together." Expense ratio 0.39%, physical replication; sector weights Information Technology 38.6%, Health Care 17.9%, Consumer Discretionary 15.9%; top-10 holdings 30.89% of the fund. The sponsor's own backtest is cited: "companies with the highest expected FCF/EV had a return of 17.3% (!) per year."
VFLO is a fund that owns large American companies chosen by a rule rather than by a manager. The rule has two steps. First it finds the companies producing the most spare cash relative to what the whole business costs to buy — cash left over after everything the company needs to spend, measured against the price of the shares plus the debt. Then, from those cheap cash generators, it discards the ones expected to grow least.
The point of doing it in that order is the article's central idea. Share prices rise for two reasons: the business generates more cash, or the market decides to pay a higher multiple for the same cash. A cheap company that is also growing can get both at once, and because the two multiply rather than add, the combination is far more powerful than either alone — Caterpillar's cash flow rose 86% while its multiple rose 186%, and the shares rose 536%.
It costs 0.39% a year and holds the shares directly rather than through derivatives. Two things are worth knowing before treating it as a quality fund. Its ten largest positions are less than a third of the fund, so it is genuinely diversified — but that list includes two gold miners and two oil companies alongside Adobe and Intuit, because businesses that look cheap on cash flow are often cyclical ones near the top of their cycle. And the 17.3% annual return quoted for this strategy comes from the fund sponsor's own research, not an independent source.
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