“Large-cap stocks seldom trade at low valuations without good reason. The low valuations of the fund’s holdings tend to reflect lower expected growth, profitability, or higher risk (business or financial) than their pricier counterparts,” according to Morningstar. “Directionally, the market gets valuations right, so the fund’s holdings aren’t necessarily bargains. But they could become undervalued, if investors extrapolate past growth–or lack thereof–too far into the future. That said, large-cap stocks are less likely to be mispriced than small-cap stocks, as they are more widely followed.”
Related: Hone in on Quality With This ETF
Currently, many domestic value ETFs are heavily allocated to the financial services and/or energy sectors. VTV reflects that theme, allocating over a quarter of its weight to financial stocks. The ETF’s second-largest sector weight is technology at 14.50%.
VTV has a Morningstar rating of Silver. The Vanguard fund is down about 1% this year.
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