3 Value ETFs To Offset Increasingly Frothy Growth Stocks
Wall Street has started 2022 on a down note. In the first trading week this year, the Dow Jones , the S&P 500 and the NASDAQ 100 were down about 0.3%, 1.9% and 4.5%, respectively.
Meanwhile, analysts point to the fact that value stocks and exchange-traded funds (ETFs) could gain traction in the coming years at the expense of growth shares whose valuations have become frothy following impressive returns of 2021. For instance, since the start of December 2021, the S&P 500 Value Index has gone up 6.8%. On the other hand, the S&P 500 Growth Index has gained about 2.5%.
Therefore, today we introduce three value ETFs that could appeal to a range of investors.
1. Invesco S&P 500 Pure Value ETF
- Current Price: $84.40
- 52-Week Range: $62.65 - $84.97
- Dividend Yield: 1.34%
- Expense Ratio: 0.35% per year
The Invesco S&P 500® Pure Value ETF (NYSE: RPV ) measures the performance of securities that exhibit strong value characteristics in the S&P 500 Index. Fund managers rely on three metrics—the book-value-to-price ratio, the earnings-to-price ratio and the sales-to-price ratios. The fund was launched in March 2006.
RPV, which has 124 holdings, tracks S&P 500 Pure Value Index. The top 10 holdings account for close to 17% of net assets of $3.02 billion. In terms of sub-sectors, we see financials (31.69%), health care (10.77%), consumer discretionary (9.80%), consumer staples (9.42%) and communication services (8.40%).
Berkshire Hathaway (NYSE: BRKa ) (NYSE: BRKb ), the conglomerate led by Warren Buffett; financial services group Prudential Financial (NYSE: PRU ); insurance heavyweight Cigna (NYSE: CI ); entertainment and media giant ViacomCBS (NASDAQ: VIAC ) and health services group CVS Health (NYSE: CVS ) lead the names on the roster.
In the past 12 months, the ETF is up 30.9%. It hit a record high in recent days. Forward P/E and P/B ratios stand at 10.79x and 1.31x. Despite the significant return in the past year, we remain bullish on many names in RPV.
2. iShares S&P Mid-Cap 400 Value ETF
- Current Price: $111.22
- 52-Week Range: $87.09 - $114.21
- Dividend Yield: 1.60%
- Expense Ratio: 0.18% per year
The iShares S&P Mid-Cap 400 Value ETF (NYSE: IJJ ) invests in U.S. mid-capitalization stocks that are deemed undervalued by the market relative to peers. The fund began trading in July 2000.
IJJ, which has 301 holdings, tracks the S&P Midcap 400 Value Index. The leading 10 holdings comprise almost 8% of net assets of $8.82 billion. Industrials have the largest slice, with 19.10%. Next in line are financials (16.91%), consumer discretionaries (13.94%), real estate (11.64%), information technology (10.38%) and health care (6.73%).
Real estate investment trust (REIT) Medical Properties Trust (NYSE: MPW ); Lear (NYSE: LEA ), which manufactures automotive seating and electrical distribution systems; global infrastructure consulting group Aecom (NYSE: ACM ); Reliance (NS: RELI ) Steel & Aluminum (NYSE: RS ), which processes and distributes metal products; and logistics group Knight Transportation (NYSE: KNX ) are among the top names in the fund.
Over the past year, IJJ went up by 23.4%, and saw a record high in November. Trailing P/E and P/B ratios are 21.70x and 2.08x. Interested investors could regard a potential decline toward the $107 level as a better entry point.
3. Vanguard Small-Cap Value Index Fund ETF Shares
- Current Price: $179.03
- 52-Week Range: $144.67 - $187.22
- Dividend Yield: 1.76%
- Expense Ratio: 0.07% per year
The Vanguard Small-Cap Value Index Fund ETF Shares (NYSE: VBR ) invests in a diversified group of small-caps that offer value. The fund started trading in January 2004.
VBR, which has 996 holdings, tracks the CRSP US Small Cap Value Index. The top 10 holdings make up close to 5.5% of net assets of $48.8 billion.
In terms of sub-sectors, financials lead (22.40%), followed by industrials (20.20%), consumer discretionaries (15.60%), real estate (9.60%) and technology (6.70%).
Among the leading names in the ETF are the oil and natural gas group Diamondback Energy (NASDAQ: FANG ); financial services name Signature Bank (NASDAQ: SBNY ); Nuance Communications (NASDAQ: NUAN ), which specializes in speech recognition and artificial intelligence software; IDEX (NYSE: IEX ), which manufactures pumps and other fluidics systems; and VICI Properties (NYSE: VICI ), a REIT that specializes in casino properties.
In the past year, VBR is up 20.2% and saw an all-time high in November. Trailing P/E and P/B ratios are 12.7x an 1.9x. Investors who are looking to focus on small-cap names in 2022 should research the fund further.
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