One of the more prominent themes to emerge late last year was the growing chorus of market participants voicing support for a value resurgence.
Advisors looking to capitalize on that trend while allocating to other factors can consider the WisdomTree Core Equity Model Portfolio.
“This model portfolio is designed for growth-oriented investors with a long-term horizon looking to maximize long-term potential for capital growth through a globally diversified set of equity ETFs,” according to WisdomTree.
The model portfolio features exposure to 11 exchange traded funds, including some that provide exposure to the growth and quality factors, indicating the model portfolio is a fine idea for advisors looking to gently wade back into value.
Value Stocks Can Matter Again
Exposure to the value factor could be in play following rotation away from high growth that has outperformed this year to cheaper cyclical sectors. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales).
While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain-priced compared with their competitors. Value fans believe this time may be different for value stocks, pointing to improving investment sentiment measures, 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.
“Looking ahead, we maintain our expectation that value stocks will outperform core and growth over the long run. Value stocks should benefit from the strong economic rebound in 2021 as economic activity normalizes,” according to Morningstar.
Increasing the allure of this WisdomTree model portfolio is that many of its components blend quality with value.
Valuing high-quality value is particularly important as bull markets enter their waning stages, as some market observers believe the current bull market is doing. In the early stages of bull markets, lower-quality companies see their shares soar. However, as the bull matures, investors often exhibit a preference for higher quality fare with more compelling valuations.
Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain-priced when compared with their competitors.
For more on how to implement model portfolios, visit our Model Portfolio 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.