The Trim Tabs Float Shrink ETF (NYSE: TTAC) (BATS: TTAC) debuted Wednesday, giving new life to a once popular float shrink/buyback strategy.
Once upon a time, the AdvisorShares Wilshire Buyback ETF (AdvisorShares Trust (NYSE: TTFS)) carried the Trim Tabs name and was sub-advised by the company, but AdvisorShares surprisingly changed the ETF's sub-advisor to Wilshire in July.
An ETF, Reborn
“TTAC is primarily focused on generating long-term gains that exceed those of the Russell 3000 Index. It does so by selecting approximately 100 companies that are both generating free cash flow and reducing their share count without the use of leverage,” according to a statement issued by TrimTabs.
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Top 10 holdings in TTAC include:
- Southwest Airlines Co (NYSE: LUV).
- HP Inc (NYSE: HPQ).
- Best Buy Co Inc (NYSE: BBY).
- Twenty-First Century Fox Inc (NASDAQ: FOXA).
As was the case when TrimTabs oversaw TTFS, the new TTAC is about much more than share buybacks. A cornerstone of the management team's stock selection process is actual share count reduction and whether or not companies are taking on new debt to affect lower share counts.
How It Works
“Companies execute share reductions by lowering the amount of shares outstanding, most commonly through stock buybacks, though this can also be accomplished with other corporate actions. This can prove advantageous for investors holding the stock in question, as they end up holding a 'larger piece of the pie.' TrimTabs takes an extra step by ensuring that companies executing buybacks are only doing so with free cash flow, not through additional leverage,” added TrimTabs.
TTAC charges 0.59 percent per year, or $59 on a $10,000 investment. That is above the average fee on passively managed ETFs, but below the average fee on actively managed mutual funds.
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