Market Overview

Don't Forget This Value ETF

Share:
Don't Forget This Value ETF
Related VTV
Vanguard Goes Active With 6 New Factor ETFs
Value Investing Set To Shine On Tax Reform: 5 Cheap ETFs

The value factor has been one of the most talked about investment factors this year. That hype is on display with an array of exchange-traded funds focused on value stocks attracting new assets while delivering tidy returns for investors.

During the halcyon days of the current bull market, value was not the place to be, as investors favored growth and momentum fare. That script has been flipped in 2016. An overlooked, but still worthy, option among value ETFs is the PowerShares S&P 500 Value Portfolio (NYSE: SPVU).

Refocus On SPVU

SPVU, which is 14 months old, follows the S&P 500 Enhanced Value Index. That index “tracks the performance of stocks in the S&P 500 Index that have the highest 'value score,'” according to PowerShares.

With some market observers drawing comparisons between President-elect Donald Trump and President Ronald Reagan, the theory is that if a Trump presidency has a similar impact on stocks as Reagan did, the value factor could thrive.

“From October 1980 to October 1982, the Russell 1000 Value Index, which serves as a benchmark for value stocks, outpaced the Russell 1000 Growth index by nearly 16.5 percent and the Russell 1000 Index by 8.0 percent,” said PowerShares in a recent note. “This occurred despite a brief recession in 1981 and 1982 and a 41 percent increase in the US Dollar Index (which is notable because value stocks have generally performed well in weak-dollar environments). In addition, the 10-year Treasury yield spiked over 27 percent from the end of October 1980 to a peak of 15.84 percent in September 1981, before easing to 10.71 percent in October 1982.”

Performance, Holdings And Allocations

Year-to-date, SPVU is up 15.8 percent, more than double the returns of the S&P 500 and more than 370 basis points ahead of the Vanguard Value ETF (NYSE: VTV). SPVU allocates over 44 percent of its weight to financial services stocks, nearly triple the weight assigned to its second-largest sector allocation, consumer discretionary.

SPVU holds 98 stocks and seven of its top 10 holdings are financial services stocks, a sector expected to thrive under Trump.

“Financial stocks, which are typically seen as a value play, have already benefited from expectations of fiscal stimulus spending and reduced regulation: The S&P 500 Financials Index rallied 11.5 percent post-election through Nov. 22 and was priced at 1.27 times book value, with a forward price-to-earnings (P/E) ratio of 14.94, as of Nov. 22. Prior to the election on Nov. 7, this same index had a forward P/E ratio of 13.11,” added PowerShares.

Posted-In: Long Ideas Broad U.S. Equity ETFs Politics Top Stories Markets Trading Ideas ETFs General Best of Benzinga

 

Related Articles (VTV + SPVU)

View Comments and Join the Discussion!