Market Overview

It Might Finally Be Time For This ETF

It Might Finally Be Time For This ETF

It has been a long time coming, but value stocks have finally begun to catch up to their growth rivals, though the former is still lagging the latter on a year-to-date basis.

What Happened

The value revival is still in its nascent stages. If it has legs, it could awaken the Direxion Russell 1000 Value Over Growth ETF (NYSE: RWVG). RWVG, which debuted in January, is a long/short strategy that's essentially long value stocks found in the Russell 1000 Value Index and short the names in the Russell 1000 Growth Index.

The strategy has been working recently. Since Aug. 1, the Russell 1000 Value Index is up 1.1%, more than doubling the returns of its growth rival over the same period.

Why It's Important

Two of the staples of traditional value indexes are the financial services and energy sectors, the latter of which is the worst-performing group in the S&P 500 this year. However, value's redemption story doesn't necessarily have to include energy stocks.

Energy accounts for 13.13% of the Russell 1000 Value/Growth 150/50 Net Spread Index, RVWG's underlying benchmark. But the largest energy ETF is lower by nearly 2% since the start of last month. RVWG's weight to that sector is more than triple that of the S&P 500, but over the past month, the Direxion ETF is higher by 2.45%.

One day does not make a trend, but there was strength in financials and energy names Monday, sending RWVG to a gain of 1.66%.

“Energy and financial stocks—two mainstays of value investors—are rallying while technology and health-care stocks, longtime favorites of growth buyers, are lower,” according to Barron's.

What's Next

One variable that will play a role in RWVG's near- to medium-term success is just how convincing a value rally becomes. For much of the past decade, growth has trounced value, but there have been sporadic instances of value showing signs of life only to be thwarted again by growth.

Once bitten, twice shy investors are likely to need more this time around than a few decent showings by value here and there.

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Posted-In: direxionLong Ideas News Broad U.S. Equity ETFs Specialty ETFs Trading Ideas ETFs

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