With less than three weeks to the election, value investing seems to be gaining momentum after years of underperformance. This is especially true as the historical patterns show that elections have a long track of doing wonders for value stocks.
According to research by Larry McDonald and his team at the Bear Traps Report, value stocks have outperformed growth for six months after every presidential election since 1980. Additionally, continued antitrust scrutiny of big tech companies by the candidate who wins the election (Trump or Biden) will provide a boost to value investing, putting pressure on growth stocks.
The current economic backdrop also bodes well for value stocks. A slowly recovering economy, rounds of another fiscal stimulus and the potential arrival of a coronavirus vaccine will boost consumer spending and in turn lift value stocks. A COVID-19 vaccine is anticipated to be announced "in the near term” with distribution and implementation in the first quarter of next year. Further, value investing seems more tempting given its promise for dividend yield in a near-zero rate environment and uncertainty in the stock market ahead of elections (read: 5 ETFs Rising as 'Reflation Trade' Picks Up on Stimulus Hope).
Per the latest survey of Bank of America, value stocks are trading at a near-record discount relative to momentum stocks, or those that have risen the most over the past 12 months. A greater number of fund managers expect value to outperform growth over the next 12 months, according to the survey.
That said, investors could tap the upcoming rise in value investing with top-ranked (Zacks Rank #1 (Strong Buy) or 2 (Buy)) ETFs & stocks. For the stocks, we have added extra flavor of Value Style Score of A and positive earnings estimate growth for this year.
Vanguard Value ETF (VTV - Free Report)
This fund seeks to track the CRSP US Large Cap Value Index, holding a basket of 333 stocks. With AUM of $50.6 billion and an expense ratio of 0.04%, it trades in a solid volume of around 1.8 million shares per day on average. The product has a Zacks ETF Rank #2.
iShares S&P 500 Value ETF (IVE - Free Report)
With AUM of $15.5 billion, this product follows the S&P 500 Value Index, holding 386 stocks in its basket. It has an expense ratio of 0.18% and a Zacks ETF Rank #2 (read: Biden or Trump, These 4 ETF Zones Are Set to Gain).
iShares Edge MSCI USA Value Factor ETF (VLUE - Free Report)
With AUM of $6.7 billion, this ETF follows the MSCI USA Enhanced Value Index, providing exposure to large- and mid-cap U.S. stocks with lower valuations based on fundamentals. It holds a basket of 149 securities and charges investors 15 bps in annual fees. VLUE trades in an average daily volume of 989,000 shares and has a Zacks ETF Rank #2.
Schwab U.S. Large-Cap Value ETF (SCHV - Free Report)
This ETF follows the Dow Jones U.S. Large-Cap Value Total Stock Market Index, which includes the components ranked 1-750 by full market capitalization and are classified as "value" based on a number of factors. It has amassed $6.6 billion in its asset base and charges 4 bps in annual fees. The fund trades in volume of 624,000 shares a day on average and has a Zacks ETF Rank #2.
SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report)
This ETF tracks the S&P 500 Value Index, charging investors 4 bps in annual fees. It holds 386 stocks in its basket and has amassed $2.4 billion in its basket. The fund has a Zacks Rank #2 (read: Value Outperforms Growth in September: 6 ETFs to Bet On).
Rio Tinto PLC (RIO - Free Report)
It is an international mining company engaged in finding, mining and processing mineral resources worldwide. The stock has a market cap of $76.2 billion and has estimated earnings growth of 14.7% for this year. It has a Zacks Rank #2.
Cigna Corporation (CI - Free Report)
With a market cap of $64.1 billion, Cigna provides insurance and related products and services. It has a Zacks Rank #2 and has an estimated earnings growth rate of 8.6% for this year (see: all the Large Cap Value ETFs here).
BHP Billiton PLC (BBL - Free Report)
This company is engaged in production of minerals which includes iron ore, metallurgical coal, copper and uranium as well as oil, gas and energy coal. It has Zacks Rank #2 with a market cap of $45 billion and an estimated earnings growth rate of 20.1% for fiscal year (ending June 2021).
The Kroger Co. (KR - Free Report)
This retailer operates supermarkets, multi-department stores, marketplace stores and price impact warehouse stores. With a market cap of $26.9 billion, the stock has a Zacks Rank #1 and estimated earnings growth of 49.1% for the fiscal year (ending January 2021). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altice USA Inc. (ATUS - Free Report)
It is one of the largest broadband communications and video services providers in the United States. The stock has a market cap of $16.4 billion and estimated earnings growth of 238.1% for this year. It has a Zacks Rank #2.
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