In this ~6-minute fireside chat, Vince Chen explains the FCF Quality Model to Bob Shea, CIO of Dynasty Financial Partners. Chen distinguishes the FCF approach from traditional free cash flow yield (value factor) investing: FCF Advisors focuses on free cash flow profitability — measuring return on capital, assets, and equity — rather than free cash flow relative to market cap. He explains how the FCF Quality Model combines three key factors: free cash flow profitability (looking backward), quality of earnings via accruals analysis (looking forward to sustainability), and cash flow financial strength. Chen argues this approach delivers “pure alpha” — excess return uncorrelated with traditional risk factors — by applying a bottom-up, sector-agnostic free cash flow quality analysis that translates into active portfolio weights via a modified market-cap methodology.
← All media