The rotation to value stocks and exchange traded funds has been in full bloom for a good part of this year as investors have embraced steadier, more favorably valued sectors over more volatile growth fare.
“Large-cap value securities were in vogue in our opinion as investors sought out the relatively safety of large caps that had discounted valuations, with the S&P 500 Index remaining near record highs,” said S&P Capital IQ in a recent research note. [Validated Value ETFs]
Amid the rush to value ETFs, the largest funds have, predictably, remained popular, but there are other options to explore even with the S&P 500 resting at record highs. Those options include the WisdomTree LargeCap Value Fund (NYSEArca: EZY).
The various value ETFs on the market today, to some extent, take different roads to arrive at the same value destination. However, evaluating the subtle nuances and methodologies between value ETFs is critical in making the right choice.
EZY, which is over seven years old, tracks the WisdomTree LargeCap Value Index (WTLVI). That index emphasizes earnings quality, meaning EZY is not just a value ETF, but a fund that rivals others that are weighted by earnings or revenue. [Earnings, Revenue-Weighted ETFs]
EZY’s underlying index focuses on “Price to Earnings Ratio, Price to Sales Ratio, and Price to Book Value and 1-year change in stock price. The top 30% of companies with the highest value scores within the 1000 largest companies by market capitalization are included in the Index. Companies are weighted in the Index annually based on earnings,” according to WisdomTree.
Like rival value ETFs, EZY is heavily weighted to the financial services sector. That is EZY’s largest sector allocation at 24.4% and five bank stocks are found among the ETF’s top-10 holdings.