Three Sub-$20 ETFs With Upside Potential
Some investors believe that a security's price tag is not the primary indicator of intrinsic value. For example, there were some investors and pundits that argued Apple (NASDAQ: AAPL) was inexpensive on a valuation basis when the shares traded above $700. Likewise, it is possible for a stock trading at $25 to be considered expensive relative to its peer group.
The takeaway is that price tags can be superficial, but many investors still find themselves attracted to stocks or ETFs that look cheap on the outside. If the total number of U.S.-listed exchange traded products, ETFs and ETNs, is rounded up to 1,500, then currently about 11 percent of the universe trades below $20.
That is fair amount and an amount large enough to mean some sub-$20 should be ignored while plenty of others are worth embracing. Here are few that fall into the positive, latter category.
Global X FTSE ASEAN 40 ETF (NYSE: ASEA)
In what has been a rough year for many of the more popular diversified emerging markets ETFs, the Global X FTSE ASEAN 40 ETF has gained 6.4 percent due to its focus on top-performing Southeast Asian markets. While ASEA is an interesting ETF trading below $18.50, investors should do a few minutes of homework before jumping in.
The ETF is framed as a play on the ASEAN group of nations, but the fund only offers exposure to five ASEAN members or just half the group's membership. Additionally, ASEA's weight to the Philippines is slight at 0.7 percent. As was noted last month, ASEA's 38.6 percent allocation to Singapore has been holding the fund back this year.
That puts somewhat of a burden on Malaysia, Indonesia and Thailand to pick up the slack. Indonesia and Thailand have answered the call, though it might be advisable to wait on ASEA until after global markets digest the result of Malaysia's upcoming elections. Still, ASEA has $20 this year if Indonesian and Thai equities continue on their current trajectories.
PowerShares High Yield Equity Dividend Achievers Portfolio (NYSE: PEY)
The PowerShares High Yield Equity Dividend Achievers Portfolio could be attractive to investors on three fronts. First, the ETF trades below $11. Second, PEY has a 30-day SEC yield of 4.05 percent. Third, the ETF pays a monthly dividend, providing for a steadier income stream than ETFs and stocks that deliver payouts on a quarterly basis.
PEY tracks the NASDAQ Dividend Achievers 50 Index, which has outpaced the Dow Jones U.S. Select Dividend Index, the S&P 500 Value Index and the S&P 500 this year, according to PowerShares data.
The catch with PEY is that the ETF is not diverse at the sector level with utilities, financials and consumer staples combing for 75 percent of the fund's weight. On the other hand, PEY does a good job of mixing large-, mid- and small-caps together. Top-10 holdings include Altria (NYSE: MO), AT&T (NYSE: T) and Lockheed Martin (NYSE: LMT). PEY has $321.5 million in assets and charges 0.6 percent per year in fees.
First Trust Value Line Dividend Index Fund (NYSE: FVD)
The First Trust Value Line Dividend Index Fund offers investors another low price tag dividend option, but FVD's time below $20 may be short as it is just pennies below that area as of this writing. FVD uses a different weighting scheme than many of the larger dividend ETFs on the market today. The Value Line Dividend Index starts with stocks that earn a Value Line safety rating of one or two.
From there, Value Line selects those companies with a higher than average dividend yield, as compared to the indicated dividend yield of the Standard & Poor's 500 Composite Stock Price Index, according to First Trust. Sub-$1 billion market cap firms are also eliminated.
The Value Dividend Index has also outpaced the Dow Jones Dividend Select Index and the S&P 500 this year. Conservative investors will enjoy knowing FVD's underlying index has a three-year standard deviation that is 320 basis below that of the S&P 500 and a beta of 0.75 against the benchmark U.S. index, according to First Trust data.
FVD, a quarterly dividend payer, has $628.6 million in AUM and annual expense ratio of 0.7 percent.
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