Here's Why Investors Can Bet on These Value ETFs
Value investing is seeing growing popularity in 2021. Investors are upbeat about accelerated coronavirus vaccine rollout, introduction of another round of fiscal stimulus and the reopening of U.S. economy, which may lead to faster U.S. economic recovery from the pandemic-led economic slowdown. These factors are creating a conducive environment for value stocks to outperform their growth counterparts this year. Notably, the Russell 1000 Value index has climbed 17% so far this year, whereas the Russell 1000 Growth index is up 5%.
Going on, Keith Lerner, chief market strategist at Truist, has also commented that “technology sector earnings momentum relative to the broader market peaked in late May of 2020. Given that we expect the economy to grow well above trend this year and next, value stands to benefit. Indeed, when looking at the value indices, they are dominated by financials and tend to have greater exposure to economically-sensitive sectors that are more leveraged to an economic recovery,” according to a CNBC article.
Steve Chiavarone, portfolio manager, equity strategist and vice president at Federated Hermes, also believes that cyclical stocks belonging to the value investing category are projected to witness 250% earnings growth in the second quarter, per a CNBC article.
Furthermore, the streak of upbeat U.S. economic data is keeping investors upbeat. The U.S. economy grew an annualized 6.4% in the first quarter of 2021, breezing past expectations of 6.1%, following a 4.3% uptick in the previous three-month period. Apart from the reopening-driven third-quarter jump last year, the latest reading marked the best period for GDP since the third quarter of 2003.
The latest U.S. consumer confidence data looks encouraging as the metric has risen for the second consecutive month in April. Markedly, the metric hit a one-year high in March. The Conference Board's measure of consumer confidence index stands at 121.7 for April, comparing favorably with March’s revised reading of 109. Moreover, April’s reading beat the consensus estimate of 113.0, per a Reuters’ poll. Notably, the metric stands at the highest level since last February, when the index was at 132.6.
The world’s largest economy is seeing a decline in the number of new coronavirus cases now. According to the U.S. Centers for Disease Control and Prevention (CDC), more than half of American adults have received at least one vaccine dose, per a Reuters article.
Top-Ranked Value ETFs to Bet on
It is worth noting here that value investing seems more lucrative given the improvement in corporate earnings growth and expectation for higher inflation. Moreover, value stocks seek to capitalize on market inefficiencies. They can deliver higher returns with lower volatility compared with the growth and blend counterparts. Additionally, value stocks are less exposed to trending markets and their dividend payouts offer a safety shield during market turbulence.
Against this backdrop, here are some top-ranked value ETFs that investors can consider betting on:
iShares S&P 500 Value ETF IVE
The fund provides exposure to large U.S. companies that are potentially undervalued relative to comparable companies. With AUM of $22.32 billion, it charges 18 basis points (bps) in expense ratio. The fund carries a Zacks Rank #2 (Buy).
Vanguard Mega Cap Value ETF MGV
With AUM of $4.32 billion, the fund tracks the performance of the CRSP US Mega Cap Value Index. It charges a fee of 7 bps and has a Zacks Rank #2.
Schwab U.S. Large-Cap Value ETF SCHV
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index. With AUM of $9.65 billion, it charges 4 bps in expense ratio. The fund has a Zacks Rank #2 (read: Value ETF (SCHV) Hits New 52-Week High).
Invesco S&P 500 Enhanced Value ETF SPVU
The fund is based on the S&P 500 Enhanced Value Index. With AUM of $127.2 million, it charges 13 bps in expense ratio. The fund carries a Zacks Rank #2. (read: 4 Reasons Why Value ETFs Continue to Outperform).
Vanguard S&P 500 Value ETF VOOV
With AUM of $2.21 billion, the Zacks Rank #2 fund tracks the performance of the S&P 500 Value Index. It charges a fee of 10 bps.
SPDR Portfolio S&P 500 Value ETF SPYV
The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Value Index. With AUM of $11.83 billion, it charges 4 bps in expense ratio. The fund carries a Zacks Rank #2.
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SCHWAB-US LCV (SCHV): ETF Research Reports
SPDR-SP5 VL (SPYV): ETF Research Reports
ISHARS-SP500 VL (IVE): ETF Research Reports
VANGD-SP5 VALUE (VOOV): ETF Research Reports
INVS-SP5 EN VL (SPVU): ETF Research Reports
VANGD-MG CAP VL (MGV): ETF Research Reports
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