Value stocks and the corresponding value ETFs are again trailing their growth and momentum rivals, but patient investors can still find credible opportunities in the value space. That includes ETFs, such as the Guggenheim S&P 500 Pure Value ETF (NYSEArca: RPV), which has been the best-performing value ETF since the start of the current bull market.
RPV may be seen as a basic type of enhanced or smart beta ETF strategy that specifically targets value stocks that tend to trade at a lower price relative to fundamentals, like dividends, earnings and sales. Along with the simple pure value play, such as RPV, the other value-focused ETFs may also incorporate other factors in their screening process.
Value stocks usually trade at lower prices relative to fundamental measures of value, like earnings and the book value of assets. On the other hand, growth-oriented stocks tend to run at higher valuations since investors expect the rapid growth in those company measures, but more are growing wary of high valuations.
Why Value Investing Works Over Long Haul
RPV “tracks the S&P 500 Value Index, which focuses on book value to price ratio, earnings to price ratio, and sales to price ratio,” according to Guggenheim. “Proving that value investing works over the long haul, RPV is the best-performing value of the current U.S. bull market,” reports InvestorPlace.
Growth stocks tend to run at higher valuations since investors expect the rapid growth in those company measures. The value style, though, has came into focus after a bout of heightened market volatility and lingering global uncertainty pushed investors to reconsider riskier high-growth stocks.
RPV has a small-cap counterpart, the Guggenheim S&P Smallcap 600 Pure Value ETF (NYSEArca: RZV), which has been the best-performing small-cap ETF in this bull market, confirming that value is a viable long-term factor across market cap segments.
“From March 10, 2009 through March 5, 2018, RPV delivered average annualized returns of 27.47%, good for a cumulative return of 745.67%, according to Morningstar data. Investors fortunate enough to have bought RPV on March 10, 2009 and held it until now would have seen a $10,000 investment grow into more than $88,000,” according to InvestorPlace.
Value stocks have historically outperformed growth stocks, or companies with high earnings expectations, in almost every market over the long-haul. RPV’s top two sector weights are financial services and consumer discretionary. Financials are staples in many value strategies.
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