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3 ETFs for Stock Ideas

April 21, 2024
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There are numerous ways to generate ideas for stocks or to help with stock picking. 

Some ideas might include:
Getting tips from experts (Scuttlebutt)
Copying what the famous investors do (e.g. Apple and Warren Buffett)
Screening (Very popular, filter stocks based on criteria)

A favourite of mine is to look at ETFs which invest in stocks related to a specific theme e.g. gaming, low volatility, social sentiment and many more.

It is also generally free as most ETFs disclose the stock positions they hold.
Below, I list 3 of my favourite ETFs to generate stocks ideas.

1. MOAT ETF

This is a great ETF because it invest in stocks that exhibit "MOAT" characteristics i.e. stocks with an enduring competitive advantage. The ETF leverages of Morningstar's proprietary moat rating system to invest in companies that display "Wide Moat" characteristics i.e. stocks that they think will keep their competitive advantage for 20 years +. Moreover, the ETF also takes into account the value of the stock so that the list of stocks are effectively undervalued wide moat stocks a compelling proposition.

2. COWZ ETF

A lot of investors will tell you that free cash flow is the most important metric to consider. Most investors agree that it is the vital input to determining a company's value. You have probably heard of a DCF or discounted cash flow?

A quote from Warren Buffett:
"Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life."

The reason why I like the COWZ ETF is that it considers the Russell 1000 (top 1000 companies) and invest in the top 100 companies based on their free cash flow yield.

In the last 5 years, the ETF has outperformed the sp500 and the reason why I like is that the companies actually generates cash (lots of it). So, you should able to find companies that are attractively valued based on their free cash flow with superior business models.

Note, just be aware of companies that has a lot of stock based compensation as this can increase free cash flow quite significantly.

3. PKW ETF

The Invesco BuyBack Achievers ETF is another interesting ETF that invest in stocks that have reduced their share count by a lot.

Companies that buy back shares are usually mature businesses with superior business models. The list of companies are the opposite of new growth companies that need to issue shares to fund their growth.

Other characteristics that normally go along with companies that buy back shares are high profitability and growing dividends, these companies use buy backs as part of their toolkit to increase shareholder value.


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