This Strategy Can Help You Beat the Market — At Lower Risk Years from now, if some Hollywood screenwriter wanted to craft movie script about the markets investors have been forced to navigate the last few years, the title would probably be “When Chaos Met Uncertainty.” And I couldn't disagree. No sooner had we exited the COVID-19 pandemic than we were forced to deal with war, inflation, Washington catfights, economic uncertainty, whipsawing stock prices and technology dislocation. Yes, Chaos is meeting uncertainty. As investors, we can't just run and hide. There are still opportunities out there. We just need to search them out. And we need to shift the odds in our favor. Today I want to show you one strategy that can help you do that — and list a few stocks that can fill the bill. RECOMMENDED LINK I QUIT traditional investing (Watch this crazy 1-minute trading demo) I'm not buying ANY stocks, cryptos, or bonds for the foreseeable future... and instead, I'm just repeating one easy-to-follow trade. A trade that could pay hundreds, even thousands, of dollars almost every time you execute it... (89.47% of the time to be exact). And in this short video, I'm going to demonstrate the entire process step-by-step so you can start using it too. Go here to see how ONE trading technique could make you $1,000 per month. Free Cash Flow is King At times of heightened uncertainty (as the old mantra tells us), Cash is King. Or, more specific to your investment choices, Cash Flow is King. The fact is that numerous studies — plus my own real-time investing experience — clearly show that one of the best valuation measures you can find is “free cash flow (FCF) yield.” Stocks with the highest FCF yield consistently produce higher risk-adjusted returns than any other valuation factor I know of — and beat the market overall. Over the past 20 years alone, stocks with the highest free cash flow yields have beat the S&P 500 by an average of 7% per year, as you can see below. That gives you an incredibly powerful edge — and one that can boost your investing results. And it's an easy metric to figure out on your own — even on the back of a restaurant napkin if need be. Here's how. Take the amount of free cash flow (FCF) a company generated (over the trailing 12 months, or TTM) compared to the total value of the business including equity and debt aka “enterprise value,” or EV. Simple but effective, and even easier to figure with the aid of Microsoft Excel. Here's the hard evidence of just how effective the free cash flow yield metric can be for investors. As the chart shows, large-cap companies with the highest FCF yield have consistently outperformed nearly every other valuation metric — and with much less volatility to boot. (Which is great for this uncertain stretch.) You can see for yourself how well FCF yield stacks up against other, more popular valuation measures like Price/Earnings (P/E) and Price/Book (P/B) ratios. Free cash flow yield consistently earns higher returns with far less chance of losses. It's really no contest. From 1991 to 2022, Russell 1000 stocks with the highest FCF yield returned more than 16% per year — with negative 12-month periods only 16% of the time. The benchmark Russell 1000 Index, by contrast, returned just over 9% annually (just over half as much) and posted negative 12-month returns about 19% of the time. RECOMMENDED LINK Free Demo Inside... This incredible new app may have just solved investors' number one problem. You see, most people are terrible at buying and selling stocks at the right time. But the TradeSmith app takes the emotion out of investing. It's quant software alerts you to the mathematically correct time to buy and sell for maximum profits. We're on a mission to get the TradeSmith app in as many hands as possible... So for the first time ever, we are giving anyone who watches this free demonstration a chance to test this product for 30 days. Click here to view this opportunity Screening for Cash Flow Royalty I recently screened for some high FCF yield stocks — creating a “watch list” to follow. And here are two stocks that popped up on my screen — both of them in TradeSmith's Health Indicator Green Zone. The first is M.D.C. Holdings (MDC), with a recent FCF yield of 19.6%. Denver-based MDC is in the homebuilding and financial services businesses. Its shares are trading right around $42 right now, with a 52-week range of $27.04 to $43.66. The $2 dividend payout gives the stock a yield of 4.89%. And it delivered earnings and revenue beats with its first-quarter financial report, announced in early May. A second high FCF yield stock is Humana Inc. (HUM) — with a yield of 10.7%. The Louisville-based healthcare provider is an industry heavyweight. It currently trades at about $522, with a 52-week range of $418.70 to $571.30. Its $3.54 a share dividend gives it a yield of about 0.7%. Obviously, do your own research on each of these stocks, or if you're an Ideas by TradeSmith subscriber, screen for others. It's a strategy that puts the odds in your favor. Even in the Age of Uncertainty and Chaos. Good investing, Mike Burnick Senior Analyst, TradeSmith P.S. There is a coming Cash Shock that threatens to erase billions from Americans' retirement accounts. But in this short video, you'll see me pull off 12 winning “cash-flow positive” trades while the market fell 9%. You need to see this if you want to know how to survive what's coming. More Investable Information at Your Fingertips TradeSmith's 2023 Guide to Beating Inflation Bitcoin Is Far from Dead (Here's Proof) This Could Be the Amazon of Gene-Editing Stocks Electric Vehicles Passed This 5% Tipping Point – Here Are 2 Investments to Make Customer Support: 866.385.2076 |  support@tradesmith.com Mailbag Questions ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results. TradeSmith P.O. Box 340087 Tampa, FL 33694 Terms of Use Privacy Policy To unsubscribe or change your email preferences, please click here.