VictoryShares’ VFLO Uses Free Cash Flow to Define Quality

On April 29, 2026, Lance Humphrey, head of portfolio management at VictoryShares and Solutions, outlined VFLO’s approach to defining stock quality. VictoryShares reported more than $21 billion in assets and $5.5 billion in net inflows over the prior 12 months.

The Victory U.S. Large Cap Free Cash Flow Index, which underlies the VictoryShares Free Cash Flow ETF (VFLO), selects companies by screening for high levels of both trailing and forward free cash flow. Expected free cash flow is calculated as the average of the trailing 12 months and the next 12 months, and that figure is divided by enterprise value to produce a free cash flow yield. The index is rebalanced and reconstituted quarterly.

Humphrey argued free cash flow is a clearer measure of a company’s financial health than earnings stability or low debt because earnings can fail to convert into cash. Free cash flow is the cash remaining after capital expenditures and indicates a company’s ability to reinvest, acquire, or return capital to shareholders.

Under the methodology, a company must show both strong cash generation and an attractive valuation to be selected. The index uses a dual filter that combines trailing cash generation with analysts’ forward estimates. The growth screen acts as a quality filter intended to exclude companies that appear cheap for structural reasons.

VFLO is run as a systematic, rules-based ETF that begins selection with cash-generation metrics rather than relying solely on earnings or balance-sheet ratios. Quarterly reconstitution is designed to respond to rapid market developments and to limit exposure to value traps.

As of May 1, 2026, VFLO’s top holdings included SanDisk (4.47%), Dell Technologies (3.56%), Cigna (3.38%), Omnicom (3.22%), Zoom (3.15%), Adobe (2.94%), Salesforce (2.90%), Accenture (2.78%), Expedia (2.74%) and Merck (2.50%).

The fund and index carry standard ETF and index risks. VFLO may trade at a premium or discount to net asset value and can diverge from index performance. Investments concentrated in companies with high free cash flow may underperform when those stocks are out of favor or when industries face disruption. Company-specific events can reduce a firm’s ability to generate cash. Quarterly turnover and periodic sector concentration may increase trading costs and tax consequences. VettaFi serves as the index provider and receives a licensing fee but is not an issuer or sponsor of the ETF.

Humphrey summed up the approach with a direct line: “Show me the cash.”