One of this year’s most prominent themes has been the tectonic shift away from growth and momentum sectors to value plays.
Internet and social media stocks and exchange traded funds have been stung the worst by this trend, though biotechnology has suffered mightily as well. Solar stocks and ETFs have fallen on hard times as well. [FSLR, Solar ETFs Dim As Investors Ditch Momentum Stocks]
In fact, each of last year’s top-10 sector ETFs would be considered growth plays, but of those 10, only the First Trust Global Wind Energy Fund (NYSEArca: FAN) has traded higher over the past 90 days.
Value ETFs have picked up some of the slack and the objective here is to examine some value funds beyond familiar names such as the Vanguard Value ETF (NYSEArca: VTV) and the iShares S&P 500 Value ETF (NYSEArca: IVE). The following ETFs, accompanied by year-to-date returns and asset growth, can be used as alternatives or complements to IVE and VTV.
Explicit dividend products were left off this list, but a recent recap of some impressive dividend ETFs have be accessed here. [ETFs for Monthly Dividend Hunters]
RevenueShares Large Cap Fund (NYSEArca: RWL)
2014 Performance: Up 3%.
2014 Asset Growth: Nearly $13 million added.
Comment: RWL’s lineup has the potential to surprise investors accustomed to traditional S&P 500 ETFs. For example, Wal-Mart (NYSE: WMT) is RWL’s largest holding at 4.6% of the fund’s while Apple (NasdaqGS: AAPL), the largest stock in the cap-weighted S&P 500, checks in at the fourth spot with a weight of just 1.78%. There is something to the revenue weighting methodology as RWL has outperformed the S&P 500 over the past three years. Plus, RWL’s P/E of 14.1 is below that of the cap-weighted S&P 500. [Revenue Weighted ETF Provided Buffer Amid Biotech Tumble]
Powershares Dynamic Large Cap Value Portfolio (NYSEArca: PWV)
2014 Performance: Up 4.4%.
2014 Asset Growth: $16.3 million added.
Comment: The PowerShares Dynamic Large Cap Value Portfolio tracks the Dynamic Large Cap Value Intellidex Index, which applies a 10 factor screen to achieve its value objective. Investors may be surprised to learn that that methodology turns up an ETF that is surprising on familiar value destinations such as energy and consumer staples.
Those sectors combine for about 21% of PWV’s weight while financials and technology combine for nearly 45%. It’s hard to argue with the results because over the past three-, five- and 10-year periods, the Dynamic Large Cap Value Intellidex Index has outperformed the S&P 500 Value Index and the Russell 1000 Value Index, according to PowerShares data.
Vanguard Mega Cap Value ETF (NYSEArca: MGV)
2014 Performance: Up 3.4%.
2014 Asset Growth: $77.9 million.
Comment: MGV is nirvana for conservative investors. For the cost conscious, MGV features an expense ratio of 0.11%, making it cheaper than 90% of comparable funds. Its 156 stocks include an array of familiar if not beloved value plays, including nine Dow components among the top-10 holdings. Exxon Mobil (NYSE: XOM), Microsoft (NasdaqGS: MSFT) and Johnson & Johnson (NYSE: JNJ) are MGV’s top-three holdings.
Guggenheim S&P 500 Pure Value ETF (NYSEArca: RPV)
2014 Performance: Up 6%.
2014 Asset Growth: $297.7 million added.
Comment: RPV targets the cheapest third of the S&P 500 Index and weights its holdings by the strength of their value characteristics,” according to Morningstar analyst Alex Bryan. Specifically, RPV tracks 118 S&P 500 stocks, including Alcoa (NYSE: AA) 2.4%, Berkshire Hathaway (NYSE: BRK-B) 2.2% and Wellpoint (NYSE: WLP) 2.1%. The ETF leans toward financials at 25.1% of the portfolio, followed by utilities at 16.9% and energy at 16.9%. [A S&P 500 ETF with Targeted Exposure to Value Stocks]
Schwab U.S. Large-Cap Value ETF (NYSEArca: SCHV)
2014 Performance Up: 2.7%.
2014 Asset Growth: $151.3 million added.
Comment: Not only is SCHV a value play, but it is a valid idea for the frugal investor. The ETF’s 0.07% expense ratio is downright paltry among U.S. large-cap ETFs and the fund can be traded commission-free by those with Schwab brokerage accounts.
SCHV holds 359 stocks and currently has a P/E ratio of 16.2% and a price-to-book ratio of two, according to Schwab data. Top-10 hodlings include nine Dow members with Wells Fargo (NYSE: WFC) the outlier.
SPDR S&P 400 Mid Cap Value ETF (NYSEArca: MDYV)
2014 Performance: Up 4.7%
2014 Asset Growth: $16.3 million added.
Comment: The value tilt can be applied to mid-caps, too, and MDYV’s 2014 performance shows investors do not need to limit their value hunt to large- and mega-caps. The $93.9 million ETF holds 291 stocks with an average market value of $4.66 billion.
No stock accounts for more than 1.3% of MDYV’s weight. The ETF allocates 28.9% to financial services stocks with industrials, technology and consumer discretionary also commanding double-digit sector weights.