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Is American Century U.S. Quality Value ETF (VALQ) a Strong ETF Right Now?

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The American Century U.S. Quality Value ETF (VALQ - Free Report) made its debut on 01/11/2018, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by American Century Investments. VALQ has been able to amass assets over $238.33 million, making it one of the larger ETFs in the Style Box - All Cap Value. VALQ, before fees and expenses, seeks to match the performance of the AMERICAN CENTURY U.S. QUALITY VALUE INDX.

The American Century U.S. Quality Value Index seeks to select securities of large and mid-capitalization companies that are undervalued or have sustainable income.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.29% for VALQ, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.52%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 23.90% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Consumer Staples round out the top three.

When you look at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL - Free Report) accounts for about 2.65% of the fund's total assets, followed by Te Connectivity Ltd Common Stock Chf.57 (TEL - Free Report) and Intl Business Machines Corp Common Stock Usd.2 (IBM - Free Report) .

Its top 10 holdings account for approximately 21.81% of VALQ's total assets under management.

Performance and Risk

So far this year, VALQ has gained about 16.67%, and is up roughly 31.88% in the last one year (as of 10/28/2024). During this past 52-week period, the fund has traded between $46.96 and $62.88.

The ETF has a beta of 0.94 and standard deviation of 15% for the trailing three-year period. With about 244 holdings, it effectively diversifies company-specific risk.

Alternatives

American Century U.S. Quality Value ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

Capital Group Dividend Value ETF (CGDV - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV - Free Report) tracks S&P 900 Value Index. Capital Group Dividend Value ETF has $11.42 billion in assets, iShares Core S&P U.S. Value ETF has $19.27 billion. CGDV has an expense ratio of 0.33% and IUSV 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 - All 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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