Market Overview

A Cheap Value ETF For April

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A Cheap Value ETF For April

Investors looking to circle their wagons around the still-lagging value factor in hopes value stocks will rebound later this year have plenty of exchange traded funds to consider. That group includes the SPDR Portfolio S&P 500 Value ETF (NYSE: SPYV).

The $1.33-billion SPYV is CFRA Research's focus ETF for the month of April. With an annual expense ratio of 0.04 percent, the equivalent of $4 on a $10,000 investment, SPYV is one of the least expensive value ETFs on the market. In fact, SPYV is the cheapest ETF tracking the S&P 500 Value Index. The SPDR fund is significantly less expensive than the Vanguard S&P 500 Value ETF (NASDAQ: VOOV) and the iShares S&P 500 Value ETF (NYSE: IVE).

“SPYV is one of the three ETFs tracking this index, but at just 4 basis points, the SPDR ETF is at 11 basis points cheaper than VOOV and 14 basis points less than IVE,” CFRA Director of ETF & Mutual Fund Research Todd Rosenbluth in a note out last week.

Spying On SPYV

SPYV holds 389 stocks with a weighted average market value of $125.23 billion. The ETF's underlying index “contains stocks that exhibit the strongest value characteristics based on: book value to price ratio; earnings to price ratio; and sales to price ratio,” according to State Street.

As is the case with many traditional value funds, SPYV is heavily allocated to the financial services and energy sectors. Those sectors combine for 36.72 percent of the fund's weight. Seven of the ETF's top 10 holdings, including Berkshire Hathaway Inc. (NYSE: BRK-B) and JPMorgan Chase & Co.(NYSE: JPM), hail from those sectors.

With passively managed ETFs, we think investors focus too much on how well a fund tracks a benchmark and the fund’s past performance record,” said Rosenbluth. “Meanwhile, we think SPYV’s performance record relative to active funds is the result of investment decisions made by those active funds, not the ETF manager SSGA. CFRA thinks what’s going to drive SPYV in 2018 and beyond are its holdings.”

The research firm has a Buy rating on Dow component JPMorgan Chase.

Fees Matter

Fees matter when it comes to investors' long-term returns. Those fees also matter when it comes to luring investors in the first place. SPYV is proof positive of that notion.

Since its expense ratio reduction in mid-October and the addition of SPYV onto a commission free platform, SPYV has pulled in more than $1 billion of new money. Meanwhile, its average daily trading volume has doubled to approximately 700,000 shares,” Rosenbluth said. 

CFRA has an Overweight rating on SPYV.

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