Hundreds of exchange traded funds feature some exposure to value stocks or are outright dedicated to the factor. Few, if any, can match the Invesco S&P 500® Pure Value ETF (RPV) when it comes to value devotion and intensity.
That’s a byproduct of RPV following the S&P 500 Pure Value Index, which measures stocks based on book-value-to-price ratio, earnings-to-price ratio, and sales-to-price ratio. S&P 500 companies are also measured by several growth factors.
“The ratio between the growth score and the value score is used to rank each stock as either deep value, blend or deep growth. Only the deep value stocks are selected and are factor weighted such that securities demonstrating the strongest value characteristics receive proportionally greater weights,” according to Invesco.
In other words, investors that are looking to focus on value in large cap form may find RPV’s purity attractive as just 14% of its 121 holdings are classified as growth or blended stocks.
“RPV has just 121 focused on the companies with deepest value traits rather than including companies with a blend of value and growth. RPV has heftier weights in financials (44% of assets vs. 21%) and energy (7% vs. 5%) and lighter ones in information technology (4% vs. 11%) and health care (9% vs. 15%),” said CFRA Research Head of ETF & Mutual Fund Research Todd Rosenbluth in a recent note.
CFRA has a “positive” rating on the $2.55 billion RPV, and as Rosenbluth notes, the Invesco ETF is topping its rival, the iShares S&P 500 Value ETF (NYSEArca: IVE), this year. IVE tracks the more traditional S&P 500 Value Index.
“In the first half of 2021, RPV rose 27% ahead of the 16% for its broader value and S&P 500 based cousin IVE,” adds Rosenbluth. “In the subsequent weeks, RPV has held steady and year-to-date through August 6 had a 26% total return. Rated as a CFRA five-star based on risk, reward, and cost factors, we think the fund is well positioned for continued success over the next nine months.”
As the CFRA analyst notes, RPV’s financial services exposure is hefty. It stands at 44.55% as of Aug. 10, more than quadruple its second-largest sector, which is consumer discretionary. That says RPV is a fine idea for investors looking to position for a potential rise in 10-year Treasury yields and more clues from the Federal Reserve about the possibility of an acceleration to the rate hike timeline.
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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.
