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The year 2021 has started off on a good note for the value stocks. In the pandemic-stricken 2020, investors had shown increased inclination toward growth stocks that were gaining from record-low interest rates. However, an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the pandemic-led economic slowdown. These factors are creating a conducive environment for value stocks to outperform their growth counterparts this year.
Importantly, value stocks beat growth stocks by the highest margin since 2001 in February 2021, according to Bank of America (per a Business Insider article). Bank of America also believes that although the shift to value stocks had begun with rising 10-year U.S. Treasury Note yields, the outperformance is here to stay in the ongoing year led by a host of other tailwinds. In this regard, analysts have also said that “although rising rates triggered the rotation, we see a host of other reasons to prefer value over growth, including the profit cycle, valuation, and positioning that can drive further outperformance," as stated in the above-mentioned article.
If this was not enough, Steve Chiavarone, portfolio manager, equity strategist and vice president at Federated Hermes believes that cyclical stocks belonging to the value investing category are projected to witness 250% earnings growth in the second quarter, according to a CNBC article.
Also, the Federal Reserve has raised its economic growth outlook considering the vaccine and stimulus optimism and expects higher inflation this year. The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020, per a CNBC article. It has also raised the economic growth forecast from 3.2% to 3.3% for 2022. Moving on, growth is likely to cool down to 2.2% in 2023. The Fed has predicted longer-run growth measure at 2.3% (read: Ride the Latest Fed Minutes Optimism With These ETFs).
Top-Ranked Value ETFs to Bet on
It is worth noting here that value investing seems more lucrative given the improvement in corporate earnings growth, expectation for higher inflation and rising bond yields. Moreover, value stocks seek to capitalize on the market inefficiencies. They can deliver higher returns with lower volatility compared with the growth and blend counterparts. Additionally, value stocks are less exposed to trending markets and their dividend payouts offer a safety shield during market turbulence.
Against this backdrop, here are some top-ranked value ETFs that investors can consider betting on:
The fund provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies. With an AUM of $21.36 billion, it charges 18 basis points (bps) in expense ratio. The fund carries a Zacks Rank #2 (Buy).
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index. With an AUM of $9.11 billion, it charges 4 bps in expense ratio. The fund has a Zacks Rank #2.
The fund is based on the S&P 500 Enhanced Value Index. With an AUM of $117.6 million, it charges 13 bps in expense ratio. The fund carries a Zacks Rank #2 (read: Time for Value ETFs Ahead?).
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Value Index. With an AUM of $9.79 billion, it charges 4 bps in expense ratio. The fund carries a Zacks Rank #2 (read: 4 Sectors & Their ETFs Offering Great Value Now).
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Top-Ranked Value ETFs to Add to Your Portfolio
The year 2021 has started off on a good note for the value stocks. In the pandemic-stricken 2020, investors had shown increased inclination toward growth stocks that were gaining from record-low interest rates. However, an accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy may lead to faster U.S. economic recovery from the pandemic-led economic slowdown. These factors are creating a conducive environment for value stocks to outperform their growth counterparts this year.
Importantly, value stocks beat growth stocks by the highest margin since 2001 in February 2021, according to Bank of America (per a Business Insider article). Bank of America also believes that although the shift to value stocks had begun with rising 10-year U.S. Treasury Note yields, the outperformance is here to stay in the ongoing year led by a host of other tailwinds. In this regard, analysts have also said that “although rising rates triggered the rotation, we see a host of other reasons to prefer value over growth, including the profit cycle, valuation, and positioning that can drive further outperformance," as stated in the above-mentioned article.
If this was not enough, Steve Chiavarone, portfolio manager, equity strategist and vice president at Federated Hermes believes that cyclical stocks belonging to the value investing category are projected to witness 250% earnings growth in the second quarter, according to a CNBC article.
Also, the Federal Reserve has raised its economic growth outlook considering the vaccine and stimulus optimism and expects higher inflation this year. The central bank has lifted its forecast for GDP growth to 6.5% in 2021 from 4.2% stated in December 2020, per a CNBC article. It has also raised the economic growth forecast from 3.2% to 3.3% for 2022. Moving on, growth is likely to cool down to 2.2% in 2023. The Fed has predicted longer-run growth measure at 2.3% (read: Ride the Latest Fed Minutes Optimism With These ETFs).
Top-Ranked Value ETFs to Bet on
It is worth noting here that value investing seems more lucrative given the improvement in corporate earnings growth, expectation for higher inflation and rising bond yields. Moreover, value stocks seek to capitalize on the market inefficiencies. They can deliver higher returns with lower volatility compared with the growth and blend counterparts. Additionally, value stocks are less exposed to trending markets and their dividend payouts offer a safety shield during market turbulence.
Against this backdrop, here are some top-ranked value ETFs that investors can consider betting on:
iShares S&P 500 Value ETF (IVE - Free Report)
The fund provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies. With an AUM of $21.36 billion, it charges 18 basis points (bps) in expense ratio. The fund carries a Zacks Rank #2 (Buy).
Vanguard Mega Cap Value ETF (MGV - Free Report)
With an AUM of $4.00 billion, the fund tracks the performance of the CRSP US Mega Cap Value Index. It charges a fee of 7 bps and has a Zacks Rank #2.
Schwab U.S. Large-Cap Value ETF (SCHV - Free Report)
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index. With an AUM of $9.11 billion, it charges 4 bps in expense ratio. The fund has a Zacks Rank #2.
Invesco S&P 500 Enhanced Value ETF (SPVU - Free Report)
The fund is based on the S&P 500 Enhanced Value Index. With an AUM of $117.6 million, it charges 13 bps in expense ratio. The fund carries a Zacks Rank #2 (read: Time for Value ETFs Ahead?).
Vanguard S&P 500 Value ETF (VOOV - Free Report)
With an AUM of $1.97 billion, the Zacks Rank #2 fund tracks the performance of the S&P 500 Value Index. It charges a fee of 10 bps.
SPDR Portfolio S&P 500 Value ETF (SPYV - Free Report)
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Value Index. With an AUM of $9.79 billion, it charges 4 bps in expense ratio. The fund carries a Zacks Rank #2 (read: 4 Sectors & Their ETFs Offering Great Value Now).
Want key ETF info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>