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No Sign of Santa Rally: Buy These Top-Ranked Value ETFs
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Heightened volatility is playing foul in the stock market approaching Christmas and has pushed all major indices into correction territory. Myriad woes including higher interest rates, the lingering U.S.-China trade dispute, slowdown in Japan and Europe, troubles in emerging market, threats of global slowdown and of course the renewed slide in oil price have dampened demand for riskier assets.
Additionally, the Fed’s less-expected dovish move in the latest FOMC meeting has made investors jittery. Further, threats of a government shutdown have added to the woes. Even the holiday optimism has failed to drive the stocks higher, indicating that there is no signs of Santa Claus rally this year (read: Fed Hikes Rates But Offers Dovish Outlook: ETFs to Play).
The market swoon came despite the fact that the American economy is on track this year to expand at the fastest pace in 13 years thanks to robust job creation, strong GDP growth, a 50-year low unemployment rate, solid wage gains, as well as rising consumer and business confidence.
The weak trend in likely to continue as the uncertainties are expected to loom going into the New Year. As such, it has raised the appeal for value investing (read: Top Ranked Value ETFs for Long Term Investors).
Why Value?
Value stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued by the market. These seek to capitalize on inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with growth and blend counterparts. Additionally, value stocks are less susceptible to trending markets and their dividend payments serve as safety in times of market turbulence.
Notably, these stocks outperform the growth ones across all asset classes when considered on a long-term investment horizon.
Given this, it might be prudent to take a closer look at a few of the popular products in this space for excellent exposure and some outperformance heading into the New Year. All these ETFs have a solid Zacks ETF Rank of #1(Strong Buy) with a Medium risk outlook.
This fund seeks to track the CRSP US Large Cap Value Index, holding a basket of 342 stocks. Like other value funds, financials makes the top sector at 23.45 share followed by healthcare (16.2%) and technology (14.7%). With AUM of $42.5 billion and an expense ratio of 0.05%, VTV trades in a solid volume of around 1.7 million shares per day on average (read: Fed Hikes Rates But Offers Dovish Outlook: ETFs to Play).
This ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies by tracking the Russell 1000 Value Index. From a sector look, financials takes the largest allocation at 22%, followed by healthcare (15.5%) and information technology (9.6%). It holds 723 stocks in its basket with AUM of $37 billion and average daily volume of 2.4 million shares. The product charges 20 bps in annual fees.
With AUM of $16.2 billion, IVE follows the S&P 500 Value Index and holds 380 stocks in its basket. Financials takes the largest share at 22.5% while healthcare, energy and consumer staples also receive double-digit exposure each. The fund trades in volume of 1.4 million in shares per day on average.
This fund tracks the Dow Jones U.S. Large Cap Total Stock Market Index, holding 352 stocks in its basket. Financials is the top sector with 20.6% allocation while health care, information technology, consumer staples and energy round off the next four spots. The ETF has amassed assets worth $4.5 billion and trades in volumes of around 496,000 shares a day on average. It charges an expense ratio of 0.04%.
With AUM of $3.5 billion, the fund offers exposure to 150 large and mid-cap U.S. stocks with lower valuations based on fundamentals. Here, information technology takes the top spot at 20.3% while healthcare, financials, communications and consumer discretionary round off the next spots with double-digit exposure each. It has amassed $3.5 billion in its asset base while charges 15 bps in annual fees. VLUE trades in average daily volume of 456,000 shares (read: 5 Secret Santa ETFs & Stocks to Buy for Christmas).
With AUM of $2.2 billion, this ETF tracks the S&P 500 Pure Value Index, holding 380 securities in its basket. Like many other value funds in the space, about one-fourth of the portfolio is allocated to the financials sector, while healthcare and energy round off the next two spots. The product trades in a solid average daily volume of 536,000 shares and charges 4 bps in annual fees.
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No Sign of Santa Rally: Buy These Top-Ranked Value ETFs
Heightened volatility is playing foul in the stock market approaching Christmas and has pushed all major indices into correction territory. Myriad woes including higher interest rates, the lingering U.S.-China trade dispute, slowdown in Japan and Europe, troubles in emerging market, threats of global slowdown and of course the renewed slide in oil price have dampened demand for riskier assets.
Additionally, the Fed’s less-expected dovish move in the latest FOMC meeting has made investors jittery. Further, threats of a government shutdown have added to the woes. Even the holiday optimism has failed to drive the stocks higher, indicating that there is no signs of Santa Claus rally this year (read: Fed Hikes Rates But Offers Dovish Outlook: ETFs to Play).
The market swoon came despite the fact that the American economy is on track this year to expand at the fastest pace in 13 years thanks to robust job creation, strong GDP growth, a 50-year low unemployment rate, solid wage gains, as well as rising consumer and business confidence.
The weak trend in likely to continue as the uncertainties are expected to loom going into the New Year. As such, it has raised the appeal for value investing (read: Top Ranked Value ETFs for Long Term Investors).
Why Value?
Value stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued by the market. These seek to capitalize on inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with growth and blend counterparts. Additionally, value stocks are less susceptible to trending markets and their dividend payments serve as safety in times of market turbulence.
Notably, these stocks outperform the growth ones across all asset classes when considered on a long-term investment horizon.
Given this, it might be prudent to take a closer look at a few of the popular products in this space for excellent exposure and some outperformance heading into the New Year. All these ETFs have a solid Zacks ETF Rank of #1(Strong Buy) with a Medium risk outlook.
Vanguard Value ETF (VTV - Free Report)
This fund seeks to track the CRSP US Large Cap Value Index, holding a basket of 342 stocks. Like other value funds, financials makes the top sector at 23.45 share followed by healthcare (16.2%) and technology (14.7%). With AUM of $42.5 billion and an expense ratio of 0.05%, VTV trades in a solid volume of around 1.7 million shares per day on average (read: Fed Hikes Rates But Offers Dovish Outlook: ETFs to Play).
iShares Russell 1000 Value ETF (IWD - Free Report)
This ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies by tracking the Russell 1000 Value Index. From a sector look, financials takes the largest allocation at 22%, followed by healthcare (15.5%) and information technology (9.6%). It holds 723 stocks in its basket with AUM of $37 billion and average daily volume of 2.4 million shares. The product charges 20 bps in annual fees.
iShares S&P 500 Value ETF (IVE - Free Report)
With AUM of $16.2 billion, IVE follows the S&P 500 Value Index and holds 380 stocks in its basket. Financials takes the largest share at 22.5% while healthcare, energy and consumer staples also receive double-digit exposure each. The fund trades in volume of 1.4 million in shares per day on average.
Schwab U.S. Large-Cap Value ETF (SCHV - Free Report)
This fund tracks the Dow Jones U.S. Large Cap Total Stock Market Index, holding 352 stocks in its basket. Financials is the top sector with 20.6% allocation while health care, information technology, consumer staples and energy round off the next four spots. The ETF has amassed assets worth $4.5 billion and trades in volumes of around 496,000 shares a day on average. It charges an expense ratio of 0.04%.
iShares Edge MSCI USA Value Factor ETF (VLUE - Free Report)
With AUM of $3.5 billion, the fund offers exposure to 150 large and mid-cap U.S. stocks with lower valuations based on fundamentals. Here, information technology takes the top spot at 20.3% while healthcare, financials, communications and consumer discretionary round off the next spots with double-digit exposure each. It has amassed $3.5 billion in its asset base while charges 15 bps in annual fees. VLUE trades in average daily volume of 456,000 shares (read: 5 Secret Santa ETFs & Stocks to Buy for Christmas).
SPDR S&P 500 Value ETF (SPYV - Free Report)
With AUM of $2.2 billion, this ETF tracks the S&P 500 Pure Value Index, holding 380 securities in its basket. Like many other value funds in the space, about one-fourth of the portfolio is allocated to the financials sector, while healthcare and energy round off the next two spots. The product trades in a solid average daily volume of 536,000 shares and charges 4 bps in annual fees.
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 >>