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Is iShares MSCI USA Value Factor ETF (VLUE) a Strong ETF Right Now?

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A smart beta exchange traded fund, the iShares MSCI USA Value Factor ETF (VLUE - Free Report) debuted on 04/16/2013, and offers broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

VLUE is managed by Blackrock, and this fund has amassed over $7.80 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, VLUE seeks to match the performance of the MSCI USA Enhanced Value Index.

The MSCI USA Enhanced Value Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid capitalization stocks.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for VLUE are 0.15%, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 2.97%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

VLUE's heaviest allocation is in the Information Technology sector, which is about 27% of the portfolio. Its Healthcare and Financials round out the top three.

Looking at individual holdings, At&t Inc (T - Free Report) accounts for about 5.16% of total assets, followed by Intel Corporation Corp (INTC - Free Report) and Cisco Systems Inc (CSCO - Free Report) .

The top 10 holdings account for about 26.96% of total assets under management.

Performance and Risk

The ETF has gained about 7.18% and is down about -6.27% so far this year and in the past one year (as of 02/01/2023), respectively. VLUE has traded between $81.86 and $109.30 during this last 52-week period.

The ETF has a beta of 1.04 and standard deviation of 27.72% for the trailing three-year period, making it a medium risk choice in the space. With about 155 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Value Factor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $54.08 billion in assets, Vanguard Value ETF has $102.09 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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