Few, if any, investment factors have received acclaim and attention afforded to the value factor. Along with the quality factor, value is the factor most frequently employed in factor-based exchange traded funds. It is easy to understand the allure of value as an ETF foundation.

“Value is the undisputed champion of investment anomalies. According to academic and practitioner research, value strategies have consistently delivered a premium over the capitalization-weighted market portfolio for the last 90 years. Investors have known about the benefits of value investing for nearly as long. Ben Graham and David Dodd popularized the approach in their 1934 classic, Security Analysis. The legendary Warren Buffett has practiced and preached long-term value investing for his entire career, now spanning more than 50 years,” according to a new note authored by Jason Hsu and Vivek Viswanathan of Research Affiliates.

Investors can tap the value anomaly with an array of ETFs, but the PowerShares Fundamental Pure Large Value Portfolio (NYSEArca: PXLV) goes a step further by adding a fundamental overlay.

An intelligent index ETF, PXLV tracks the RAFI Fundamental Large Value Index. The index pulls is its constituents from a universe of 2,500 large value stocks, according to PowerShares. A hidden gem among value ETFs, PXL is up 7.7% over the past year. [The New Black: Value ETFs]

“Believers in the efficient market hypothesis see value stocks as risky and undesirable. Value investors are extracting a risk premium. But many practitioners who are familiar with investor psychology think of the value anomaly as a mistake that institutions and individuals make for a host of behavioral reasons. The two camps can argue endlessly,” according to Research Affiliates.

Not surprisingly, PXLV’s spin on value includes a hefty 24.4% weight to finanical services stocks. That sector is undervalued relative to the S&P 500. PXLV does however sport an almost 13% weight to richly valued consumer staples names, but in the ETF’s favor, PXLV’s consumer discretionary and utilities weights are moderate.

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