With more than half of the S&P500 constituents now in a bear market (down >20% from 252-day high), investors are being more selective and vigilant with their allocation decisions. At FCF Advisors, we offer a suite of investment solutions to fit your allocation needs:
- Core Equities: Stay allocated to high quality companies producing free cash flow and away from the concentration risks embedded in most passive global core strategies. While recession fears are high and growing, our flagship FCF Quality strategies provide investors with exposure to global core equities.
- Inflation Hedge: To combat soaring consumer prices, many investors are allocating to Real Assets. The equity securities of companies owning and operating assets such as REITs, toll roads and cell towers impact our lives every day. That said, end user demand for these essential goods and services tends to be relatively sustainable and inelastic throughout a cycle. Backed by tangible, hard assets, these high quality companies tend to generate returns linked to inflation as many of their cash flows are tied to contractual inflation escalators. At FCF Advisors, we built a multi-asset strategy to hedge investors’ inflation concerns.
- Geopolitical Uncertainty: Energy markets were tight before the Ukraine-Russia War. Now they are in a crisis, with key prices for oil, natural gas, and coal up from 100%-500% since early 2021. Western responses aimed at pain relief such as stimulus checks, subsidies, and price controls will only add to inflationary pressures. The war has accelerated the forces of deglobalization which has led to shorter and more secure supply chains. This means greater capital expenditures and higher costs – adding to inflation and squeezing profit margins. A possible solution to combat supply chain concerns is our multi-asset real asset strategy.
- Innovation and Disruption: This theme is absolutely top of mind for many investors, however, markets have been punishing unprofitable companies. That said, at FCF Advisors we built a strategy to give investors exposure to innovative companies (R&D intensity) that can fund their innovation from free cash flow – the Free Cash Flow Profitability factor.
Generated from our data and research infrastructure, our Free Cash Flow Quality Model aims to identify Quality companies with strong and sustainable profitability that will consistently outperform the market. We use the outputs from this model to provide a broad array of investment solutions. Free Cash Flow Profitability is the most important component of our model as it has the highest 1-month correlation to forward returns over the last 20 years vs. both traditional Quality measures such as ROE, ROA and Gross Margin; and other major factors such as value and momentum. Investors can access our strategies via ETFs, SMAs, model delivery, and through more than 50 fully customizable indexes.