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Value ETF Investing to Shine as a Slowdown Looms Large
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The World Bank booted the global growth forecast for this year as the United States, China and other major economies have shown greater-than-expected resiliency. However, 2023 is still likely to be one of the slowest growth years for advanced economies in the last five decades as two-thirds of developing economies will see lower growth than in 2022 (read: World Bank Lifts 2023 Global Growth Forecast: 5 ETF Picks).
Also, the bank halved its prior 2024 U.S. growth forecast to 0.8%, and cut China’s forecast by 0.4 percentage point to 4.6%. The forecast for the Euro zone for next year was also reduced slightly. It means global growth slowdown looms large next year. In this scenario, value ETF investing is likely to rule.
Value investing is a strategy that involves selecting stocks that appear to trade for less than their intrinsic or book value. This method, popularized by Warren Buffett, the “Oracle of Omaha,” aims to identify undervalued companies with strong fundamentals — such as dividends, earnings, and sales — which are expected to produce strong future cash flows.
The outperformance of value stocks during slowdown can be attributed to a few key factors:
Stable Cash Flows: Value companies, often mature, are more likely to generate steady cash flows, making them less susceptible to market fluctuations.
Dividends: These companies typically pay dividends, providing a steady income stream for investors, which is particularly attractive during slowdown.
Investor Sentiment: In times of economic difficulties, investors often change their focus from growth prospects to value.
Value Stocks Are Cheap Now
Growth stocks staged a comeback this year on hopes of a less-hawkish Fed. In comparison, value ETFs underperformed. But value ETFs are available at dirt-cheap valuation currently. While Vanguard Growth ETF (VUG - Free Report) has a P/E of 28.80X, Vanguard Value ETF (VTV - Free Report) has a P/E of 15.80X.
In fact, a pure-play tech ETF, iShares Expanded Tech-Software Sector ETF (IGV - Free Report) has a P/E of as high as 48.06X. In comparison, the pure-play sectoral value ETF Invesco Dynamic Oil & Gas Services ETF (PXJ) has a P/E of 29.84X.
Below we have highlighted a few value ETFs that are cheap and may make a rebound if growth stocks’ rally falters and recessionary worries hit the global economy hard.
Image: Bigstock
Value ETF Investing to Shine as a Slowdown Looms Large
The World Bank booted the global growth forecast for this year as the United States, China and other major economies have shown greater-than-expected resiliency. However, 2023 is still likely to be one of the slowest growth years for advanced economies in the last five decades as two-thirds of developing economies will see lower growth than in 2022 (read: World Bank Lifts 2023 Global Growth Forecast: 5 ETF Picks).
Also, the bank halved its prior 2024 U.S. growth forecast to 0.8%, and cut China’s forecast by 0.4 percentage point to 4.6%. The forecast for the Euro zone for next year was also reduced slightly. It means global growth slowdown looms large next year. In this scenario, value ETF investing is likely to rule.
Value investing is a strategy that involves selecting stocks that appear to trade for less than their intrinsic or book value. This method, popularized by Warren Buffett, the “Oracle of Omaha,” aims to identify undervalued companies with strong fundamentals — such as dividends, earnings, and sales — which are expected to produce strong future cash flows.
The outperformance of value stocks during slowdown can be attributed to a few key factors:
Stable Cash Flows: Value companies, often mature, are more likely to generate steady cash flows, making them less susceptible to market fluctuations.
Dividends: These companies typically pay dividends, providing a steady income stream for investors, which is particularly attractive during slowdown.
Investor Sentiment: In times of economic difficulties, investors often change their focus from growth prospects to value.
Value Stocks Are Cheap Now
Growth stocks staged a comeback this year on hopes of a less-hawkish Fed. In comparison, value ETFs underperformed. But value ETFs are available at dirt-cheap valuation currently. While Vanguard Growth ETF (VUG - Free Report) has a P/E of 28.80X, Vanguard Value ETF (VTV - Free Report) has a P/E of 15.80X.
In fact, a pure-play tech ETF, iShares Expanded Tech-Software Sector ETF (IGV - Free Report) has a P/E of as high as 48.06X. In comparison, the pure-play sectoral value ETF Invesco Dynamic Oil & Gas Services ETF (PXJ) has a P/E of 29.84X.
Below we have highlighted a few value ETFs that are cheap and may make a rebound if growth stocks’ rally falters and recessionary worries hit the global economy hard.
ETFs in Focus
ClearBridge Focus Value ESG ETF (CFCV - Free Report) – 19.43X
WisdomTree International AI Enhanced Value Fund (AIVI - Free Report) – 18.13X
VictoryShares US Value Momentum ETF (ULVM - Free Report) – 18.08X
VanEck Morningstar Global Wide Moat ETF (MOTG - Free Report) – 17.37X
WisdomTree U.S. AI Enhanced Value Fund (AIVL - Free Report) – 16.99X
American Century Focused Large Cap Value ETF (FLV - Free Report) – 16.58X