Since the start of last year, there has been ample discussion regarding the value factor’s resurgence against the growth factor. Indeed, many value-oriented exchange traded have easily outpaced the S&P 500 for a year now while the comparable growth ETFs have lagged the broader market.
In fact, many growth ETFs have been bleeding assets while investors flock to value funds. However, the iShares S&P 500 Growth ETF (NYSEArca: IVW) is an example of a growth ETF investors should monitor, particularly as the technology sector prints new highs. IVE is up nearly 19% over the past year and currently resides near all-time highs.
Value stocks typically trade at cheaper prices relative to fundamental measures of value, such as earnings and the book value of assets. In contrast, growth stocks tend to run at higher valuations since investors expect the rapid growth in those company measures.
Investors are typically more aggressive during periods of heightened volatility and would chase popular growth stocks. Since growth stocks show high multiples, investors may expect that the companies will sustain a high growth rate. In contrast, traders may feel that firms with low multiples would continue to experience tepid growth. However, the value style came into focus last year after a bout of heightened market volatility and lingering global uncertainty pushed investors away from riskier high-growth stocks.
The growth style, though, may be gaining momentum as investors turned to upbeat economic and earnings data, causing many to adopt a more risk-on attitude.
“IVW has now gained 22.66% from its 52-week low, which was hit back on February 8, 2016. The fund has now returned 0.89% over the past month, 3.93% over the past three months, and 3.47% in the past six months. Those returns compare to the benchmark S&P 500 index’s 0.08%, 6.51%, and 5.44% returns in the same periods, respectively. While growth stocks (mostly tech names) trailed the wider markets in the second half of last year, they’re coming back with a vengeance now,” according to ETF Daily News.
More than half of IVW’s combined weight is allocated to technology and consumer discretionary stocks. The ETF’s top 10 holdings include hallmarks of many growth ETFs, such as Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN) and Google parent Alphabet Inc. (NASDAQ: GOOG).
“IVW currently sits above its 10-day, 20-day, 50-day, 100-day, and 200-day moving averages (MAs), which from a technical standpoint suggests a very strong possibility that the recent gains can continue. That’s because the shares have no short-term overhead resistance to bump up against,” adds ETF Daily News.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.