Strategists Discuss Market Resilience and Free Cash Flow Strategy

Many strategists have been calling for a pullback in stocks, but so far, the market has been resilient. So what should an investor do? VettaFi Financial Futurist Dave Nadig tells Yahoo Finance Live that many financial advisors are “looking at companies with an excess of free cash flow whether or not that’s turning into dividends”. Nadig shares his top way to play a free cash flow strategy.

Though the market seems to be resilient, some aren’t quite as convinced about the economy. So where should you be positioning your money? Dave Nadig, VettaFI Financial Futurist joins us now for the ETF report brought to you by Invesco QQQ. Dave suggests that in the current market environment, investors should consider cash flow investing.

Cash flow investing involves looking at the cash flows of companies and focusing on those with an excess of free cash flow, regardless of whether it’s being converted into dividends. This metric has been used as a proxy for value and has proven to be successful for investors over the last few years. One of the key players in this space is the COWZ ETF from Pacer, which focuses on companies with the highest free cash flow in the Russell 1000 index.

The COWZ ETF has outperformed the S&P 500 and traditional value plays over the last 2, 3, and 5 years, making it an attractive option for investors looking for value without high valuations and low dividends.

When it comes to bonds, Nadig recommends managing duration correctly, especially in anticipation of potential rate hikes. He suggests considering targeted Treasury products like those offered by BondBloxx, which allow investors to adjust their duration exposure based on their risk tolerance and market conditions.

In terms of other investment opportunities, Nadig notes that commodities and real assets have been performing well, but there has been a lack of interest from investors. He also highlights the potential for energy investments, particularly in the form of raw energy like WTI crude or midstream companies that benefit from a strong economy.

On the international front, Nadig points out the interest in Japan and Europe as potential investment opportunities. He recommends looking at currency-hedged options like the DXJ ETF from WisdomTree for exposure to Japan and keeping an eye on Europe for potential growth opportunities.

Overall, in a market environment where uncertainty looms, investors may find value in cash flow investing, managing bond duration effectively, and exploring opportunities in commodities, energy, and international markets. By staying informed and diversifying their portfolios, investors can navigate the current market conditions with confidence.