Many opportunities exist for advisors and investors looking to increase their value allocations or simply diversify their large-cap exposures heading into the end of the year. Fidelity offers value investing in several different strategy types to complement a variety of equity portfolios. This includes a passive focus on the value factor as well as three actively managed ETFs with targeted value exposure.
Passive Value Factor Investing
The Fidelity Value Factor ETF (FVAL) seeks to track the Fidelity U.S. Value Factor Index. The index considers free cash flow yield, forward-looking earnings to price, tangible book value to price, and EBITDA (earning before interest, tax, depreciation, and amortization) to enterprise value when seeking companies with attractive valuations.
See also: Consider FVAL When Adding Value
FVAL also controls for unintentional sector or size tilts and limits concentration risk. Securities within each sector are overweighted by the same amount instead of simply overweighting the cheapest stocks. This may allow for greater portfolio diversification while working to reduce portfolio concentration. FVAL carries a management fee of 0.15%.
Actively Managed Large-Cap Value Investing
Fidelity offers several large-cap-focused ETFs with an eye to the value exposure. The Fidelity Enhanced Large Cap Value ETF (FELV) seeks capital appreciation and to outperform the Russell 1000 Value Index. Part of the Enhanced ETF Suite, which converted from mutual funds in 2023, FELV uses a proprietary, systematic model to select securities.
FELV invests primarily in securities within the Russell 1000 Value Index. It includes analysis across several factors, such as valuation, growth, and quality, though there is no expectation that all factors will prove effective at all times. Instead, the investment team believes the benefits of including various perspectives leads to portfolio diversification that may outperform across various market cycles. The strategy also includes input from nontraditional data sources outside financial statements to create a more detailed picture of a security’s return potential. FELV has an expense ratio of 0.18%.
Meanwhile, the Fidelity Fundamental Large Cap Value ETF (FFLV) seeks long-term growth of capital and brings active management to core equity portfolios. The strategy leverages fundamental bottom-up analysis and high conviction investment ideas from Fidelity portfolio managers in a risk-managed portfolio with style consistency.
FFLV offers exposure to high conviction stocks among Fidelity portfolio managers in a portfolio of 60-150 companies. Securities are given a conviction score, with the highest conviction stocks included in the final portfolio. The strategy must adhere to the overall risk profile and Morningstar Style Box for the fund. It also balances sector weights and individual stock weighting. FFLV carries an expense ratio of 0.38%.
See also: A Deep Dive Into Fidelity’s Fundamental ETF Suite
The Fidelity Blue Chip Value ETF (FBCV) seeks long-term growth of capital and invests in large-cap blue chip value companies. Blue chip companies are well-known, established companies with stable financials. Fidelity believes the companies the strategy invests in to be undervalued compared to their peers based on sales, earnings, assets, growth potential, or cash flow.
The strategy uses fundamental analysis to assess a company’s industry position, financial health, and overall market and economic conditions. It seeks to find companies with large dislocations between the stock price and intrinsic value on the belief that securities purchased with larger margins of safety may generate better risk/return profiles and reduced volatility. FBCV has an expense ratio of 0.59%.
Data as of 09/27/24
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