Exchange traded funds that emphasize the widely followed value factor are on the comeback trail this year after several years of noticeably lagging their growth and momentum rivals.
Plain vanilla index ETFs that track the value theme has outperformed so far this year, or at least have not done as poorly as broader benchmarks. Nevertheless, potential investors should still look under the hood of these value stock ETFs as no two are created alike and offer varying performances.
Popular value ETFs include the Vanguard Value ETF (NYSEArca: VTV). VTV follows the tracks the CRSP US Large Cap Value Index and is one of the most widely followed value ETFs. CRSP includes sales/price and historical earnings/price ratio as well as 12-month forward earnings/price ratio and dividend yield to form its value indexes.
Related: 3 High Octane Value Trades for a Bear Market
Value has recently retreated and that theme could continue over the near-term as the energy and financial services sectors, frequently the two largest sector allocations in many value ETFs, historically lag in November.
That does not mean there is not opportunity with value ETFs. Value investing is a popular long-term investment strategy. Value stocks have historically outperformed growth stocks, or companies with high earnings expectations, in almost every market over the long-haul.
[related_stories]For instance, the MSCI USA Value Index has outperformed the MSCI USA Growth Index by an annualized 81 basis points since 1974 through September 2015.
Related: 3 High Octane Value Trades for a Bear Market
VTV’s “price is trading near the support of a horizontal channel pattern. Many traders regard the sideways momentum as a period of consolidation, and most will look to add to their positions as close to the trendline as possible to make the most of the lucrative risk/reward setup,” according to Investopedia.
Another prominent name among value ETFs is the iShares MSCI USA Value Factor ETF (NYSEArca: VLUE).
VLUE “seeks to track the performance of an index that measures the performance of U.S. large- and mid-capitalization stocks with value characteristics and relatively lower valuations, before fees and expenses,” according to iShares.
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Vanguard Value ETF
