ETF Battles: COWG vs. QOWZ vs. QQQG - A Triple Header Cash Cows Duel!
What are free cash flow stocks and what type of investment potential do they offer? On today's episode of ETF Battles, we're going to feature an audience requested triple header. This is a matchup between free cash flow ETFs from Pacer and Invesco. This is going to be good. Stick around.
You're watching ETF Battles and I'm Ronda Ley. It's great to have you with us. If it's your first time joining us, well, welcome aboard and be sure to hit that subscribe button to join our community. You can hit me up in the comment section below if there's an ETF battle that you'd like to see. Send me your exact ETF tickers. We could do double, triple, and quadruple headers.
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Today's triple header is an ETF contest and it was requested by a viewer named Whippers Snapper 7. There's an old term that we almost never hear anymore, Whippers Snapper 7. This is a contest between a pair of cash flow ETFs, free cash flow ETFs from Pacer and Invesco Qoz from Invesco. Now, Whippers Snapper 7 also wanted us to include ticker symbol GFLW from Victory Shares.
We omitted that one in this contest because it's so new that it has very little data for analysis. So, got to give it a little bit more time, Whippers Snapper 7 to cook, maybe at least a year, and then check back with us. But again, thank you for your excellent battle suggestion. I'm looking forward to today's contest. So, let's welcome our judges. We've got Shaina Sisle with Banrian Capital Management and Mike Akins from ETF Action joining us. Great to have you back.
Great being here, Ron. Thanks for having me. Thanks for having me back. Yeah. So, our four battle categories are going to be cost, exposure, strategy, performance, and yield, and then mystery. Mystery, of course, is where our judges can pick a factor or thing that they feel is pertinent and crucial to today's matchup. Judges can also nominate wildcard ETFs if they feel there's better choices somewhere else. I've got the scorekeeping duties and at the end of the program we will declare an overall winner.
Keep in mind the battle outcomes are ever predetermined or known in advance by myself or our judges. So the first categories cost. Let's kick things off with Mike. Mike, please get us started. Yeah. So you know pretty straightforward valley. We got 39 bips for QZ versus the triple QG at 49 and Kyoji at 49. So on an absolute basis, you know, you're 10 bases cheaper on that Q. These are hard tickers. QZ and you've got from a kind of a liquidity perspective trading in and out of it.
The largest product is COG and it's got a pretty significant advantage in terms of your cost to get in and out of the product. And I think it more than makes up for that 10 basis point difference in the QZ. And to that end I'm going to give Cai the largest, the oldest, the most liquid in the space, the winner from a cost total cost perspective. Shaina, you're up next. How do you see it in terms of cost?
I see it exactly the same way Mike does. The QQQG and QZ are tiny funds with like almost no liquidity. They don't even trade a million dollars of volume a day. And so even though QZ has a 10 basis points cheaper expense ratio, it is so much harder to trade. And so whatever advantage it has on the expense ratio goes away really fast for that reason. So I agree with Mike. It's COG. All right. Well, that takes us next to exposure strategy. Shaina, you're still up. So how do these funds compare?
I will start by saying that COG and QQQG are the exact same strategy just with a different indicy. So, Pacer has a series of funds that all kind of follow this cash cow idea that and they really on their website break it down why free cash flow matters and why they think it is a attribute of companies that will outperform and they do an excellent job on their website of doing that. But essentially what it says is that companies that have above average free cash flow positive free cash flow perform better over time and they tend to have higher growth rates as a result because they can maintain and invest at times where companies without free cash flow cannot.
As a matter of fact, when people talk about value stocks, they talk a lot about using PE as their valuation metrics to decide, you know, what to invest in. If you're looking at growth stocks, you want to look at price to free cash flow. And that is actually the valuation metric that you want to look at to determine, you know, the valuation comparability, discount, premium versus peers when you're looking at a growth stock. Everything that Pacer kind of lays out on their site is why they would want to use this metric as a key component for picking good growth stocks in the US large cap space.
Makes sense. The only difference between their two products is one uses the Russell 1000, narrows it down to the top 100 highest free cash flow margin companies and then uses price momentum to narrow that from the thousand to 100 and then uses price momentum in that 100. So it's 100 names. Whereas QQQG uses the NASDAQ 100. So it's only looking at a universe of 100 stocks versus a thousand and it's picking the top 50.
It's the top 50% of an index versus the other one where you're really looking at the creme to the creme because it's a much larger universe. QWZ is also using the NASDAQ, but not the NASDAQ 100. And it is using positive cash flow for each of the trailing 11 years. I actually like that methodology better because it speaks to the stability and consistency of those cash flows. And so for me QZ is my winner because of that requirement to have that consistency over time.
And so for that reason it's my winner. One caveat I do want to point out because of the nature of these stocks they all are super heavy in tech. There's like more than 50% of the portfolio allocation by sector and all three of these products is technology. And like if you look at the top 10, I think two of them it's Palanteer and the other ones it's Nvidia. So it's AI, it's those names that everybody's running into it.
It's a lot of AI exposure, a lot of tech exposure and if it's not tech, it's consumer, which again is another big growth area. So with that in mind, this is not a particularly diversified product in terms of sector exposures. In fact, QZ excludes financials and real estate altogether. And when you look at it though, they all kind of look the same in terms of their sector allocations, but QZ's insistence on the stability of that positive cash flow is what puts it over the top for me. So the QZ is my winner. Mike, you're up next. How do you see it in terms of exposure strategy?
I think Shaya laid it out pretty well on the methodologies. So if you just kind of look at these three products, they're large cap growth, right? So, they have different ways to screen. They're using free cash flow, which I think of as kind of a quality screen. So, they're adding quality to that growth metric. They all do a pretty good job of it.
I think if you're looking for maybe something alternative to pure beta large cap growth, like an IWF, the Russell 1000 growth or the S&P 500 growth or something. All three of these strategies kind of introduce a quality tilt to that. And I like I like that quality concept. If you're looking at from a long-term holding perspective, it could give you a little bit more consistency, a little bit more stable returns.
In pure bit screening methodology, I just kind of like the starting universe of QZ a little bit better. I kind of like the way that it approaches that from an exposure perspective, but they are concentrated. They look a lot like IWF, which is the Russell 1000. So I'm not sure you're getting huge differentiation here other than that kind of multi-step of quality, which in a down market, these I would expect to outperform just pure beta large cap growth because there is that construct of quality to it.
Like all three strategies, but we're talking about a space that is dominated by market cap. It's dominated by the biggest names in the industry. I'll get a little bit more of that in our mystery category. But from this these three, I like them all. I think they all have done a good job building their products. The QZ is probably my favorite from Exposure. Though I think it needs to get a little more size to it before you get, you know, start allocating. It's pretty small. And, you know, it's going to need some, you have to be smart about allocating to it yet. I'll stop there. Okay. And by size, Mike means aumum, assets under management, more money, more trading volume, all of that. Understood. Thank you, Mike. That takes us next to performance and yield. So, Mike, you're up. So, how do these ETFs compare in this category?
So, I mean, if you look at performance, they're so new. Like, I don't even know what we're doing here. It's going to be hard for me to like really say there's a winner in performance other than to say that, you know, you look at Koji, it's done really well. It's been out the longest. It's up 27% over the one year. Large growth is only up 13%. IWF's only up 13%. So, it's crushed that. I do think if you go to deconstruct those returns, couple things jump out at you.
It didn't have as big a draw down when we had kind
