As markets have tumbled, investors have been putting money into value ETFs. Not only have value funds outperformed growth throughout 2022, but they are also typically higher quality and tend to pay dividends.
“We’re seeing investors gravitating towards companies that are profitable today as opposed to companies that will be more profitable in the future,” said VettaFi’s head of research Todd Rosenbluth on TD Ameritrade’s The Watch List. “Value ETFs and value stocks are companies that are relatively profitable right now.”
Another advantage to value funds is that they can capture the upside when markets rally (like they’re doing now). But if markets enter a recession as many investors expect, value-oriented stocks with larger market capitalizations can help mute the impact with less volatile market movements. So, with markets currently rallying, one such value fund investors may want to consider is the Avantis U.S. Large Cap Value ETF (AVLV).
AVLV is an actively managed portfolio of U.S. large-cap value companies across market sectors and industry groups deemed highly profitable by the fund manager. Per its FactSet Analyst Insight Report, AVLV’s portfolio is curated using fundamental screens, such as shares outstanding, cash flow, revenue, expenses, and price-to-book value.
Avantis aims to achieve the benefits correlated with indexing, including diversification, low turnover, and transparency of exposure, but with the ability to add value by implementing an active investment strategy with current prices as the basis and the Russell 1000 Value Index as a benchmark. Trade-offs between expected returns and taxes or trade costs may also be considered to gain trading efficiencies and avoid risk.
Year-to-date, AVLV has outperformed the Russell 1000 Value Index by 467 basis points.
As of Sept. 30, AVLV had 203 holdings, with its three largest being Exxon Mobil Corp. (weighted at 3.39%), Chevron Corp. (2.75%), and Johnson & Johnson (2.75%).
AVLV has an expense ratio of 0.15%.
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