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3 Overlooked Value ETFs & Stocks to Grab Now

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The year 2018 was tumultuous for Wall Street, thanks to renewed global growth worries, Fed’s policy tightening, fears of peaking U.S. economic growth, trade war tensions and the government shutdown in the United States.

Though markets staged a solid comeback in 2019 (on the Fed’s dovish comments), as evident from the 8.2% year-to-date return by SPDR S&P 500 ETF (SPY - Free Report) , bouts of volatility are likely to impede a market rally in the future.

Inside the Upcoming Deterrents

After more than a month-long impasse, the U.S. federal government reopened in January-end for three weeks. A deadlock in passing a spending bill, wherein Trump demanded $5.6 billion funding for a border wall that was being opposed by the Democrats, was the main reason for the shutdown. Since the Democrats are still against the border wall funds, uncertainty looms large. Both sides are now considering backstop alternatives to avert another shutdown post Feb 15 (read: U.S. Government Reopens: Tap High Beta & Momentum ETFs).

Global growth worries are also rife. The International Monetary Fund (IMF) has forecast global growth of 3.5% for this and 3.6% for the next year. The forecast fell by 0.2 percentage points and 0.1 percentage point from the October report (read: IMF Cuts Global Growth Outlook: Bet on 5 Quality ETFs).

If that was not enough, the European Commission now expects Euro zone growth to slow to 1.3% this year from 1.9% in 2018. The new estimate marks a sharp decline from the Commission’s previous Euro zone growth forecast for 2019 at 1.9%. The Bank of England lowered its growth forecast for 2019 from 1.7% to 1.2% (read: Worried About European Growth? Play These 5 ETFs).

Also, a solution to the ongoing U.S.-China trade crisis is not in sight right now. Brexit issues are one of the biggest overhangs for the stock market. The World Bank has cut global growth forecast to 2.9% for this year from the previous 3%, citing rising trade tensions, lower manufacturing activity and growing financial woes in emerging-market countries (read: Forget Growth, Bet on Value ETFs in 2019). 

Why to Should You Focus on Value ETFs & Stocks

Global growth worries lead us to believe that stocks are expected to be stable in the near term but choosing a value investment is a great idea for now. Value stocks are the ones that trade below their intrinsic value and are undervalued by the market. Additionally, these stocks outperform the growth ones when the long-term investment horizon is considered.

ETF & Stock Picks

Against this backdrop, we highlight a few overlooked value ETFs, which have chances to outperform in the days ahead.

ETF Picks

Invesco S&P 500 Enhanced Value ETF (SPVU - Free Report) — $23.5 million AUM

The underlying index tracks the performance of stocks in the S&P 500 Index that have the highest value score. It charges 13 bps in fees. The fund has a Zacks ETF Rank #1 (Strong Buy). The fund added only 1.8% in the past year and added 8.9% this year.

Invesco Russell 2000 Pure Value ETF — $76.5 million

The underlying Russell 2000 Pure Value Index comprises securities with strong value characteristics. The Zacks Rank #3 (Hold) fund yields 2.28% annually. It charges 39 bps in fees. The fund added only 4.5% in the past year compared with a stellar 11.4% this year.

ValueShares International Quantitative Value ETF (IVAL - Free Report) ) – $86.6 million

The underlying Alpha Architect International Quantitative Value Index uses a five-step, quantitative, rules-based methodology to identify a portfolio of approximately 40-50 undervalued non-U.S. equity securities or their depositary receipts with the potential for capital appreciation. It yields 2.70% annually. The fund was down 12.3% in the past year but is up 8.6% this year.

Stock Picks

We also highlight a few top-ranked stock alternatives that were laggards in the past 12-week period but have gained momentum in the past week. All these stocks have a Value Score of A.

Dell Technologies Inc. (DELL - Free Report)

The Zacks Rank #1 provider of information technology has lost 51% in the past 12 weeks and is up 6% in the past week (as of Feb 8, 2019). It belongs to a top-ranked Zacks industry (top 9%).

SkyWest Inc. (SKYW - Free Report)

The Zacks Rank #1 holding company for scheduled passenger airline operations and an aircraft leasing company shed about 2.1% in the past 12 weeks and has added 5.6% in the past week (as of Feb 8, 2019). It hails from a top-ranked Zacks industry (top 4%).

PennyMac Mortgage Investment Trust (PMT - Free Report)

This real estate investment trust currently has a Zacks Rank #1. It comes from a top-ranked Zacks industry (top 41%). The stock is up 3.3% in the past three months but has added 14.5% this year.

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