Sean O'Hara of Pacer ETFs - Rethinking Value Investing

Jul 4, 2023

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Value investing has long been a pillar of success for many savvy investors. However, as the markets evolve and new dynamics emerge, this conventional approach may no longer provide optimal results. Recognizing the need for a fresh perspective, investors are now turning their attention to a different lens through which to view value investing—one that takes into account a company's free cash flow yield.

In this episode, Rusty and Robyn talk with Sean O'Hara, President at Pacer ETFs and Director at Pacer Financial. Sean began his career at PLANCO/Hartford in 1985, where he spent 22 years as a wholesaler, divisional manager, and managing director of the national wholesaler team. In 2007, Sean joined Joe Thomson at Pacer Financial to serve as a national wholesaling company for various products, including exchange-traded funds, exchange-traded notes, annuities, and SMAs. In 2015, Pacer ETFs was launched.

A leader of an award-winning ETF provider, Sean talks about cash cows, ETFs, SMAs, and artificial intelligence. More importantly, Sean speaks about the potential problems with traditional value investing and how value investing can be improved.

Key Takeaways

[02:52] - Sean's career history and why he created Pacer ETFs.
[04:19] - What makes Pacer ETFs unique?
[05:42] - What cash cow means to Pacer ETFs.
[06:22] - The pitfalls of traditional value and how Pacer thinks about value differently.
[08:44] - How Sean defines book value and intangible value.
[09:29] - The difference between enterprise value and free cash flow.
[10:23] - The impact of higher interest rates on free cash flow and dividends.
[11:10] - Tax efficiency comparison between ETFs and SMAs.
[13:16] - Sean's outlook on the market.
[15:24] - How Pacer ETF's cash cow philosophy works.
[17:31] - Sean's take on how artificial intelligence impacts market investing.
[19:20] - Sean's favorite investing idea.
[20:19] - How Sean maintains his physical and mental well-being to perform at his best.
[21:04] - The people Sean is professionally thankful for.
[22:43] - Sean's recommendations for content.

Quotes

[08:14] - "If you're going to find cheap stocks today, you can't be constrained by looking at traditional low price-to-book. You have to look at it in a different way. And free cash flow yield does that." ~ Sean O'Hara

[10:30] - "Free cash flow is the mother's milk of dividend payments. If you don't have excess free cash flow, you can't pay dividends unless you borrow money to pay them. So, if you like and want to own dividends and grow your dividends over time, companies have to have excess free cash flow." ~ Sean O'Hara

[16:49] - "The interesting offshoot to using free cash flow yield is you get a high-quality portfolio, and the names tend to have better earnings growth, which ultimately, in the end, drives stock prices." ~ Sean O'Hara

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