With value stocks roaring higher, investors may want to consider an active approach to the beloved investment factor with some new actively managed ETFs, including the Fidelity Blue Chip Value ETF (FBCV).
FBCV is one of the initial trios of active non-transparent ETFs (ANTs) Fidelity launched in 2020, bringing the cache of one of the largest mutual and index fund issuers to this nifty new fund structure.
Value stocks usually trade at lower prices relative to fundamental measures of value, like earnings and the book value of assets. On the other hand, growth-oriented stocks tend to run at higher valuations since investors expect rapid growth in those company measures. Many investors are growing wary of high valuations in growth stocks.
A Good Time to Be ‘FBCV’?
Value-related ETFs are on pace for their best-ever quarter for new inflows and are just $5 billion shy from overtaking their growth factor counterparts in assets.
Value strategies focus on stocks that are more sensitive to the business cycle. In comparison, growth trades are tied to companies capable of providing reliable profits over the long-term.
However, with the improved economic outlook fueling the rise in yields, the near-term cash flows of value equities have become more attractive relative to the long-term revenue streams of growth names.
In recent years, value tantalized investors with sporadic bullishness, only to fall behind growth once more. but some market observers believe this time could be different for the factor. Value fans point to improving measures of investment sentiment, abating fears of a recession, rebounding corporate profits, and lessening trade tensions between the U.S. and China. Furthermore, value stocks are now trading at some of their most attractive prices in years as the growth/value gap is as wide as it’s been in decades.
FBCV will normally invest primarily in equity securities of companies that the adviser believes are undervalued in the marketplace in relation to factors such as assets, sales, earnings, growth potential, or cash flow, or in relation to securities of other companies in the same industry (stocks of these companies are often called ‘value’ stocks). The adviser normally invests at least 80% of the fund’s assets in blue chip companies (companies that, in FMR’s view, are well-known, well-established, and well-capitalized), which generally have large or medium market capitalizations.
For more on active strategies, visit our Active ETF Channel.
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.