NEW YORK (TheStreet) -- Generating free cash flow is the ultimate purpose for any business, said Charles Biderman, CEO of TrimTabs. And that is why the TrimTabs International Free-Cash-Flow ETF (FCFI) is a necessary addition to any portfolio, he said.
"The only reason to start a business is to grow cash ultimately," Biderman said. "It's not to create earnings per share or revenue growth. It's to create free cash flow after all expenses."
TrimTabs International Free-Cash-Flow ETF, which launched earlier this month, invests in a basket of international companies screened for maximum free cash flow yield. FCFI tracks the TrimTabs International Free-Cash-Flow Index, which follows foreign companies with the highest free cash flow yield across ten international markets in six different currencies.
Those markets are the: Hong Kong Hang Seng Index, S&P/ASX 100 Index (Australia), Swiss Market Index, FTSE 100 Index (UK), S&P/TSX Composite Index (Canada), MSCI France Index, Korea Stock Exchange KOSPI 200 Index, Nikkei 225 Index (Japan), Deutsche Boerse AG German Stock Index and the Amsterdam Exchange Index (Netherlands).
"The top 20% of companies growing free cash flow in each those markets are currently in the FCFI," said Biderman, adding that he does not hedge currencies in the ETF.
The FCFI has lost 70 basis points since its June 2 launch. Meanwhile, Biderman's original ETF, the AdvisorShares TrimTabs Float Shrink ETF (TTFS), continues to outperform the Russell 3000 index. The TTFS is up 15% in the past 12 months compared to a 9% rise in the Russell 3000. Float Shrink represents the percent change in shares outstanding.
The Float Shrink ETF has amassed $241 million in assets under management since its October 2011 launch.
"What I tell people is that we are a hedge fund disguised as an ETF and with ETF fees," said Biderman. "The FCFI fee is 69 basis points and TTFS is 99 basis points. It's a lot cheaper than a hedge fund, and so far with TTFS the results have been much better than most hedge funds."