Down, But Not Out: Preparing For Value’s Resurgence

By Todd Shriber via

A simple definition of value investing is the implementation of a strategy that selects stocks that are trading below their intrinsic values. Decades of academic research support the notion that, particularly over long time horizons, value is one of the most efficacious investment factors.

While an array of value strategies have performed admirably over the course of the current U.S. bull market, the factor has languished in recent years. For the three-year period ending Oct. 8, 2018, the Russell 1000 Value Index is up 39.70 percent, paling in comparison to the 63.80 percent returned by the Russell 10000 Growth Index over the same period. That underscores the point that while a particular factor may be rewarding over the long haul, factor leadership varies from year-to-year.

Despite value’s recent struggles, related funds remain popular with advisors and investors. Several of the largest single-factor exchange traded funds (ETFs) are value funds and some of those products are among the largest ETFs of any variety.

With value experiencing an uncharacteristically long dry spell relative to growth and momentum, reviewing value funds could be a solid idea. The JPMorgan U.S. Value Factor ETF (JVAL) is a newer though still credible competitor in the value ETF fray.

Inside JVAL’s Methodology

JVAL, which is just weeks a way from its first anniversary, targets the JP Morgan US Value Factor Index. That benchmark “is comprised of US securities selected from the Russell 1000 Index and uses a rules-based risk allocation and factor selection process developed in conjunction with J.P. Morgan Asset Management,” according to FTSE Russell.

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