Investors looking for a unique small-cap ETF may find value in the Pacer US Small Cap Cash Cows 100 ETF (CALF). This underappreciated ETF focuses on free cash flow, which has become increasingly important in the current market climate. Large-cap stocks have been outperforming small caps since December 2023, causing trouble for diversified portfolios. However, high free cash flow firms, particularly among large caps, have been outperforming. CALF offers investors an opportunity to diversify from large-cap strategies and potentially benefit from the strong performance of high free cash flow companies [d6939c46].
CALF screens the S&P SmallCap 600 index for the top 100 companies based on free cash flow yield. With $9.1 billion in assets under management and a PEG ratio under 1, CALF is currently undervalued and presents an attractive investment opportunity. The ETF has a low price-to-earnings ratio and a high long-term earnings growth rate, further adding to its appeal [d6939c46].
However, it is important to note that CALF's performance has been lackluster, and the ETF faces technical risks. Shares of CALF have fallen below key support levels, and there is a bearish RSI divergence. Additionally, there are risks of continued underperformance among small caps and weakness among Consumer Discretionary stocks. Despite these challenges, CALF's attractive valuation and long-term potential make it a buy for investors [d6939c46].