Animal Spirits Podcast Talk Your Book: Turning Capex Into Cashflow
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Jun 23, 2025 Sean O'Hara, Director at Pacer Financial and President at Pacer ETFs, dives into the importance of free cash flow for smart investing. He explains how the Pacer NASDAQ 100 Top 50 Cash Cows Growth Leaders ETF is structured around companies with strong cash flow metrics. The chat covers investment strategies, contrasting traditional cap-weighting with a momentum-driven approach. O'Hara also tackles tech stock valuations, stressing the significance of fundamentals and rebalancing for successful portfolio management.
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Value of Free Cash Flow Margin
- Free cash flow margin measures how well companies convert sales into cash flow, which is hard to manipulate.
- This metric filters for firms that generate high excess free cash flow and can reinvest effectively.
High Valuation but Strong Cash Flow
- Palantir trades at very high sales multiples but shows strong free cash flow margin similar to top tech firms.
- Momentum weighting boosts the portfolio allocation to stocks like Palantir due to their price strength.
Momentum in Growth Strategy
- Momentum screening is crucial and based purely on price relative strength among top free cash flow margin stocks.
- Momentum weighting increases turnover but captures growth trends more effectively.