Animal Spirits Podcast Talk Your Book: Investing in Free Cash Flow
5 snips
Sep 16, 2024 
In this insightful talk, Michael Mack, an Associate Portfolio Manager at Victory Capital specializing in free cash flow investing, dives deep into the essential metrics that inform smart investment choices. He explains how to calculate free cash flow and discusses whether the 'Magnificent 7' stocks pass a free cash flow screen. Mack also addresses the nuances of avoiding value traps and the significance of sector exposure within high cash flow strategies, offering a treasure trove of insights for savvy investors.
AI Snips
Chapters
Transcript
Episode notes
Free Cash Flow's Timely Relevance
- Free cash flow yield helps find value stocks and has been timely, especially with the MAG7's dominance.
- It identifies more resilient value stocks in growth markets while performing well in value markets.
Free Cash Flow vs. Net Income
- Free cash flow, unlike net income, accounts for investments in CapEx and R&D, offering a clearer picture of financial health.
- This makes it a more relevant metric in today's market, especially for tech companies with substantial R&D expenses.
Unemotional Free Cash Flow Investing
- Michael Mack's prior experience at a hedge fund highlighted the importance of unemotional investing in free cash flow.
- A PM's attempt to pick stocks from a free cash flow model underperformed compared to purely quantitative approaches.