Core Viewpoint - The pharmaceutical sector is experiencing increased merger and acquisition activity, alongside strong product pipelines, which may present renewed investment opportunities, particularly for those focusing on free cash flow metrics [1]. Group 1: Pharmaceutical Industry Outlook - The pharmaceutical industry is seeing a ramp-up in M&A activity and has robust pipelines with significant product launches anticipated [1]. - Factors such as interest rate cuts and potential deregulation may improve sentiment towards pharmaceutical companies [4]. - Merck & Co Inc. (MRK) is highlighted as a top holding in the VictoryShares Free Cash Flow ETF (VFLO), indicating its potential for upside [2]. Group 2: Free Cash Flow (FCF) Importance - Free cash flow is a critical metric for assessing a company's financial strength, revealing cash remaining after operating expenses [3]. - As of the end of 2025, MRK demonstrated strong FCF generation, contributing to its status as the largest holding in VFLO [4]. - The Victory U.S. Large Cap Free Cash Flow Index screens companies based on expected FCF, focusing on both trailing and forward-looking measures [5]. Group 3: Merck's Performance - Merck's Q4 results exceeded estimates, with the CEO expressing a positive outlook for 2026, driven by demand for innovative products like KEYTRUDA and contributions from new launches [2][3]. - The company's performance in various segments, including cardiometabolic, respiratory, and vaccines, has bolstered its financial results [3].

Core Insights - The article emphasizes the importance of free cash flow (FCF) as a metric for evaluating equities, particularly in a market characterized by high capital spending and concentration among a few dominant companies [1][2]. Group 1: Free Cash Flow as a Metric - Free cash flow provides insight into the cash available after meeting operating and capital needs, highlighting financial flexibility that traditional earnings metrics may miss [2][4]. - Companies with excess FCF can reinvest in operations, reduce debt, pay dividends, or pursue other activities to enhance shareholder value [4]. Group 2: Market Risks and Opportunities - The current market presents opportunities but also significant uncertainties, particularly due to overconcentration in the "Magnificent Seven" stocks (Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia, and Tesla) [3]. - Heavy capital expenditures by these companies have created a disparity between reported earnings and FCF, as CapEx is capitalized and depreciated over time, potentially overstating earnings during heavy investment periods [3][4]. Group 3: Investment Strategies - Investors are encouraged to consider FCF-centered strategies to better assess a company's underlying value, as traditional earnings may not accurately reflect cash-generating capacity [4]. - ETFs like the VictoryShares Free Cash Flow ETF (VFLO) and VictoryShares Free Cash Flow Growth ETF (GFLW) focus on companies with strong FCF and growth prospects, potentially offering diversification beyond traditional value allocations [5][6]. Group 4: International Equity Trends - A significant portion of investors (over 50%) indicated a preference for international equities, driven by a declining dollar and concerns over U.S. market valuations [7]. - VictoryShares offers international FCF ETFs, such as the VictoryShares International Free Cash Flow ETF (IFLO) and VictoryShares International Free Cash Flow Growth ETF (GRIN), targeting companies with high FCF yields and growth potential [8][9]. Group 5: Historical Performance Insights - Over the past decade, the Russell 1000 Value Index has underperformed compared to the Russell 1000 Growth Index in the U.S., while the opposite trend has been observed internationally, suggesting potential mean reversion opportunities in international growth [10].

Core Insights - The VictoryShares Free Cash Flow ETF (VFLO) has reached $5 billion in assets under management (AUM) within the fourth quarter of 2025, marking a rapid growth since its launch on June 21, 2023 [1][9] - The growth trajectory of VFLO indicates a significant shift in investor sentiment towards free cash flow (FCF) investing, reflecting a focused search for corporate quality and durability [2][8] Growth and Investor Sentiment - VFLO surpassed $2 billion in AUM approximately 18 months after its launch, suggesting an accelerating growth pace and strong investor conviction in FCF investing [2] - The current economic environment characterized by higher interest rates and inflation has led investors to prioritize fundamental indicators like FCF, which is seen as a measure of financial health [3] Importance of Free Cash Flow - FCF is considered to provide greater transparency than earnings, which can be influenced by various external factors and accounting adjustments [4] - Companies with high and sustainable FCF are better positioned to navigate economic challenges, allowing them to reinvest, pay down debt, or maintain dividends without relying on capital markets [5] Investment Strategy and Index Approach - VFLO employs a rules-based, systematic approach to identify high-quality companies based on strong FCF, tracking the Victory U.S. Large Cap Free Cash Flow Index [6][12] - The Index incorporates a growth filter to exclude companies with high FCF but weak expected future growth, aiming to enhance performance across market cycles [7] Market Trends and Future Outlook - In the current higher-rate environment, there is a noticeable shift away from rewarding growth at any cost, with investors now valuing profitable, self-funding growth [8] - The milestone of $5 billion in AUM for VFLO reflects a growing demand for investment strategies focused on strong FCF fundamentals, indicating a potential shift in market dynamics [8]

Core Viewpoint - Large cap growth companies have significantly driven market gains in 2025, prompting investors to reconsider the role of value-oriented investments in their portfolios. A balanced approach using two free cash flow (FCF) ETFs, the VictoryShares Free Cash Flow Growth ETF (GFLW) and VictoryShares Free Cash Flow ETF (VFLO), is suggested to capture potential upside regardless of market conditions [1]. Group 1: Investment Strategy - The GFLW and VFLO ETFs utilize FCF as a key metric for evaluating equities, which is increasingly important in the current market environment [2]. - GFLW focuses on large-cap companies with the potential to compound FCF over time, assessing both trailing and future FCF to determine growth potential [6]. - VFLO targets companies with the highest FCF yields, emphasizing those that can allocate capital towards enhancing shareholder value through reinvestment, share buybacks, or dividends [7]. Group 2: Market Dynamics - Over the past 15 years, growth has consistently outperformed value, as indicated by the disparity in P/E ratios between the Russell 1000 Growth Index and the Russell 1000 Value Index [2]. - The valuation landscape has shifted in the last five years, with growth stocks trading at a premium compared to value stocks, leading to a widening gap that may introduce risks of growth underperformance if the spread contracts [4]. Group 3: ETF Characteristics - Both GFLW and VFLO are designed to limit exposure to companies with slow growth prospects, thereby reducing the risk of value traps [8]. - The Victory U.S. Large Cap Free Cash Flow Index, tracked by VFLO, selects high-quality companies based on profitability screens and strong FCF yield, rebalancing quarterly [12]. - The Victory Free Cash Flow Growth Index, tracked by GFLW, emphasizes profitable companies with a positive FCF trend and high growth potential [13].

Core Insights - WBI Investments, LLC has reduced its holdings in the VictoryShares Free Cash Flow ETF (VFLO) by selling 82,398 shares, bringing its total position to 160,664 shares valued at $6.02 million, which is a decrease from 1.77% to 1.54% of the fund's AUM [2][3] Fund Overview - The VictoryShares Free Cash Flow ETF (VFLO) focuses on U.S. large- and mid-cap equities with strong free cash flow generation, employing a replication strategy to track its custom index [5][9] - VFLO's investment strategy involves selecting 50 U.S. companies with robust free cash flow characteristics, ensuring a balance between high free cash flow yield and growth potential [9][10] Performance Metrics - As of November 19, 2025, VFLO's price is $37.32, with a dividend yield of 1.57% and a 1-year total return of 18.3%, outperforming the S&P 500 index [3][6] Portfolio Composition - VFLO is among the top five holdings of WBI Investments, LLC, with a current AUM representation of 1.54%, indicating its significance within the fund [3][8] - The ETF's portfolio is constructed by filtering the largest 400 profitable companies down to the 75 highest free cash flow yielding value stocks, ultimately selecting 50 stocks of growing companies [7][10]

Core Insights - The S&P 500 Index is reaching new highs, prompting advisors to seek ways to maintain equity exposure while managing valuation risks. Free cash flow (FCF) is highlighted as a crucial metric for identifying high-quality investment opportunities in the current market environment [1][2]. Group 1: Importance of Free Cash Flow - Free cash flow is emphasized as a tool to navigate elevated valuations and concentration in mega-cap growth stocks, particularly in the context of rising AI-related capital expenditures [2][5]. - Companies with strong and sustainable cash generation are positioned for long-term growth, enhancing portfolio resiliency [2]. - Historical trends show a cyclical dominance of growth and value, with current allocations being 23% towards growth and 15% towards value [3]. Group 2: FCF Mechanics and Evaluation - The evaluation of FCF involves analyzing cash flow relative to enterprise value, aiming to identify companies with attractive valuations based on profitability [8][16]. - Key metrics include FCF yield and return on invested capital (ROIC), which provide a comprehensive measure of profitability [8]. Group 3: FCF ETF Strategies - Victory Capital offers several ETFs focused on FCF, including: - VictoryShares Free Cash Flow Growth ETF (GFLW), which targets U.S. companies with high FCF profitability [9]. - VictoryShares Free Cash Flow ETF (VFLO), focusing on large-cap U.S. stocks with favorable growth prospects [9]. - VictoryShares Small Cap Free Cash Flow ETF (SFLO), investing in profitable small-cap companies with high FCF yields [9]. - International options include VictoryShares International Free Cash Flow ETF (IFLO) and VictoryShares International Free Cash Flow Growth ETF (GRIN) [10]. Group 4: FCF Strategy in Market Conditions - A FCF strategy is deemed beneficial during economic slowdowns, as companies with substantial cash reserves can better withstand downturns compared to those heavily invested [11]. - The flexibility of FCF ETFs makes them suitable for various market environments, supporting the diversification of portfolios [11][12].

Core Insights - The S&P 500 Index is reaching new highs, prompting advisors to seek ways to maintain equity exposure while managing valuation risks. Free cash flow (FCF) is highlighted as a crucial tool for identifying high-quality investment opportunities in the current market [1][2]. Group 1: Importance of Free Cash Flow - Free cash flow is essential for cutting through market noise characterized by high valuations and concentration in mega-cap stocks, particularly in the context of rising AI-related capital expenditures [2][5]. - Companies with strong and sustainable cash generation are positioned for long-term growth, enhancing portfolio resiliency [2]. - Historical trends show that growth and value investing come in cycles, with current allocations being 23% towards growth and 15% towards value [3]. Group 2: FCF Mechanics and Evaluation - The evaluation of FCF involves analyzing a company's cash flow relative to its enterprise value, aiming to identify companies with attractive valuations based on profitability [8][16]. - Key metrics include FCF yield and return on invested capital (ROIC), which provide a comprehensive measure of profitability [8]. Group 3: FCF ETF Strategies - Victory Capital offers several ETFs focused on FCF, including: - VictoryShares Free Cash Flow Growth ETF (GFLW), which targets U.S. companies with high FCF profitability [9]. - VictoryShares Free Cash Flow ETF (VFLO), focusing on large-cap U.S. stocks with favorable growth prospects [9]. - VictoryShares Small Cap Free Cash Flow ETF (SFLO), investing in profitable small-cap companies with high FCF yields [9]. - International options include VictoryShares International Free Cash Flow ETF (IFLO) and VictoryShares International Free Cash Flow Growth ETF (GRIN) [10]. Group 4: FCF Flexibility and Market Resilience - A FCF strategy is beneficial during economic slowdowns, as companies with substantial cash reserves can better withstand market downturns [11]. - The emphasis on diversifying portfolios with a focus on free cash flow is recommended for navigating various market conditions [12].

Core Insights - The VictoryShares Free Cash Flow ETF (VFLO) has demonstrated a balance between value and growth, resulting in significantly lower drawdowns compared to the S&P 500, while also outperforming it during certain market rallies [1] Performance Analysis - VFLO's empirical performance indicates that it has outperformed broader market indices in specific phases, showcasing its effectiveness in capitalizing on market rallies [1] Investment Strategy - The investment approach of VFLO combines rigorous risk management with a long-term perspective on value creation, focusing on macroeconomic trends, corporate earnings, and financial statement analysis [1]

Core Insights - The S&P 500 has reached multiple record highs, leading to investor concerns about whether valuations have peaked and if it is the right time to invest new capital [1] - Victory Capital emphasizes the importance of free cash flow (FCF) as a metric to identify high-quality businesses in elevated-valuation markets [1][2] Free Cash Flow ETFs - Victory Capital has launched a suite of ETFs focused on FCF, including the flagship VictoryShares Free Cash Flow ETF (VFLO), which tracks the Victory U.S. Large Cap Free Cash Flow Index [2] - The VFLO Index targets high-quality, large-cap companies with attractive valuations and solid growth prospects [2][12] Valuation Risks - Current market conditions present valuation risks, with stock prices showing a disconnect from fundamental metrics [3] - Investors are encouraged to mitigate valuation risks by investing in stocks with high free cash flow [3] Growth Factor and FCF - Research indicates that combining growth with FCF can enhance investment effectiveness [4] - The VictoryShares Free Cash Flow Growth ETF (GFLW) provides exposure to U.S. companies with high FCF profitability and growth potential [3][4] International Opportunities - With the dollar's weakness and other macroeconomic factors, investors are increasingly looking at international equities [5] - Victory Capital has introduced the VictoryShares International Free Cash Flow ETF (IFLO) and the VictoryShares International Free Cash Flow Growth ETF (GRIN) to expand access to high-quality, high FCF companies globally [5][6] Diversification Strategy - The suite of FCF ETFs allows investors to build a diversified portfolio, including small-cap exposure through the VictoryShares Small Cap Free Cash Flow ETF (SFLO) [6] - Research supports the appeal of FCF across various regions and asset classes, promoting a diversified investment approach based on FCF [7]

Group 1: VettaFi and Indexing Business - VettaFi, formed from the merger of multiple indexing businesses, was recently acquired by TMX Group and now manages over $75 billion in assets across various indices [2] - The company assists clients in product development, offering services such as formalizing rulebooks, conducting backtesting, and evaluating liquidity [2] - Ongoing management and education are essential for partners to differentiate themselves in the crowded ETF market, which has over 4,000 products [3] Group 2: Thematic ETFs and Portfolio Management - Thematic ETFs are becoming increasingly important, with a focus on analyzing portfolio overlap to enhance existing allocations [3] - Key thematic areas attracting investor demand include artificial intelligence and nuclear energy, with advisors typically allocating 5-10% of portfolios to these strategies [3] Group 3: Gold Market Dynamics - Gold prices are driven by strong physical demand from China and central banks, record ETF inflows, and macroeconomic factors such as a weaker U.S. dollar and inflation uncertainty [4] - Gold serves as a portfolio diversifier and can coexist with bitcoin, fulfilling different roles within an investment strategy [4] Group 4: Notable ETFs - Alerian MLP ETF (AMLP) has over $10 billion in assets and recently celebrated its 15-year anniversary [5] - VictoryShares Free Cash Flow ETF (VFLO) is approaching $5 billion in assets despite being less than three years old [5] - The ROBO Global ETF Suite focuses on robotics and artificial intelligence, while the Range Nuclear Renaissance Index (NUKZ) expands VettaFi's thematic indexing in nuclear energy [5]