In an interesting, though albeit somewhat overlooked market phenomenon, some broad market exchange traded funds that emphasize value stocks are acting growthier than their growth ETF counterparts.
Take the comparison of the $6.5 billion iShares S&P 500 Value ETF (NYSEArca: IVE) against the $9.81 billion iShares S&P 500 Growth ETF (NYSEArca: IVW). IVW is home 338 stocks and a top-10 lineup that screams growth as that is where Apple (NasdaqGS: AAPL), Google (NasdaqGS: GOOG) and Amazon (NasdaqGS: AMZN) reside in this ETF. [Broad Market ETF Basics]
On the other hand, IVE, home to 340 stocks, features stocks that investors associate with value, such as Dow components Exxon Mobil (NYSEArca: XOM), General Electric (NYSE: GE), AT&T (NYSE: T) and Wal-Mart (NYSE: WMT) as top-10 holdings.
A comparison of IVE and IVW shows a preference for the former is as it “looks like the swap into value is in place for now,” according to Captain John Charts. “While anything can happen, the charts are saying time for at least some concern, when money is looking for safety of more defensive names.”
There is evidence that investors have preferred value to growth in 2014. For example, the Utilities Select Sector SPDR (NYSEArca: XLU) is the best performer among the nine sector SPDR ETFs and the Consumer Staples Select Sector SPDR (NYSEArca: XLP) has rebounded in recent weeks following a lethargic start to the year. Conversely, the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) is the only one of the nine SPDRs that has traded lower this year. [Declines for Discretionary ETFs]
Over the past three months, IVE is up 1.8% while IVW is higher by just 0.8%. On a percentage basis, the performance gap between the two ETFs is even wider in 2014 as IVE is higher by 0.8% while IVW is up just a tenth of a percent.
IVE’s value tilt does not mean the ETF is boring. The fund’s beta is 1.01 and the consumer staples, utilities and telecom sectors combine for just 21% of the ETF’s weight. Financial services almost represent nearly 24%. IVE has a three-year standard deviation of 13.43%, which is higher than the 11.85% found on IVW. http://us.ishares.com/product_info/fund/overview/IVW.htm?fundSearch=true&qt=IVW
IVE vs. IVW Relative Strength
Chart Courtesy: Captain John Charts