Slow and steady wins the race.
There’s nothing sexy about value investing. Put a biotech doubler next to a consumer staples play with a low price-to-earnings ratio, and we all know which will draw headlines. Value investing — looking for “underappreciated” stocks based on metrics like P/E or dividend yield — is a slow game, but it’s one that has made many a fortune. Investors looking to tap into the power of value investing can do so through individual stocks, but the market has a wealth of exchange-traded funds that provide numerous styles, too.
iShares Russell 1000 Value ETF (ticker: IWD)
The IWD is the largest value fund in the game, having amassed some $24 billion in assets since inception in 2000. It invests in stocks in the Russell 1000 index of large- and mid-capitalization stocks that “are thought to be undervalued by the market relative to comparable companies,” based on metrics, including price-to-book ratio. Top holdings aren’t much of a surprise, with high weights given to Exxon Mobil Corp. (XOM), General Electric Co. (GE) and Johnson & Johnson (JNJ).
Expenses: 0.2 percent, or $20 annually for every $10,000 invested
Guggenheim S&P 500 Pure Value ETF (RPV)
If you’re looking to get really specific, the RPV allows you to invest in the top value companies of the Standard & Poor’s 500 index. RPV screens for these companies based on value fundamentals, including price-to-book ratio, P/E and price-to-sales ratio. RPV isn’t an anytime substitute for the major market index, but it does tend to outperform the S&P 500 (and the IWD, for that matter) on broad upswings. RPV’s top holdings include HP (HPQ) and NRG Energy (NRG).
Expenses: 0.35 percent
Vanguard Small-Cap Value ETF (VBR)
While small-cap stocks typically are beloved for their growth prospects, you’d be surprised at the power of value. Vanguard’s small-cap VBR fund has beaten out the growth-focused Vanguard Small-Cap Growth ETF (VBK) in performance over just about every meaningful time frame. VBR looks for metrics such as P/B, P/E and price-to-dividend ratio in building a portfolio that includes top holdings AGL Resources (GAS) and JetBlue Airways Corp. (JBLU).
Expenses: 0.09 percent
iShares MSCI EAFE Value ETF (EFV)
International investors looking to get their value exposure overseas can choose the EFV, which buys stocks in Asia, Australia, Europe and the Far East that exhibit value characteristics, such as low P/B and low P/E. One note: The fund is very overweight in Japan and the United Kingdom, at 24 percent and 22 percent, respectively. Top holdings include HSBC Holdings (HSBC) and Toyota Motor Corp. (TM).
Expenses: 0.4 percent
Global X SuperDividend U.S. ETF (DIV)
In the name of the idea that high dividends can actually be a sign of value, Global X’s DIV ETF might be one of the best value plays out there. DIV holds 50 of the market’s highest-yielding companies, featuring top holdings such as Teco Energy (TE), Reynolds American (RAI) and B&G Foods (BGS). The fund’s holdings sport an average P/E ratio of 12.7, which is lower than the S&P 500’s median of 14.6. A big, fat 6.3 percent dividend yield doesn’t hurt, either.
Expenses: 0.45 percent
ALPS Sector Dividend Dogs ETF (SDOG)
Another way to peel the yield-as-value banana is via the SDOG, which follows a similar line as the “Dogs of the Dow” strategy of picking the highest-yielding stocks in the Dow Jones industrial average. The idea is that the high dividend yield also indicates the company has sold off too much, and thus can also provide capital gains as it outperforms on the way back up. In this case, SDOG picks the five highest yielders across 10 Global Industry Classification Standard sectors. Right now, top “dogs” include Oneok (OKE), Spectra Energy Corp. (SE) and AbbVie (ABBV).
Expenses: 0.4 percent
PowerShares Buyback Achievers Portfolio ETF (PKW)
The PKW is a great way to sniff out value, as it looks for companies that have reduced shares by 5 percent or more in a trailing 12-month period. If a company is buying back stock, that means the company sees its shares as a better use of its cash than dividends or capital expenditures. In most cases, that happens because the company views its shares as a bargain. Top holdings include Home Depot (HD) and Apple (AAPL).
Expenses: 0.64 percent
WisdomTree SmallCap Earnings Fund (EES)
EES is not a traditional value fund in that you’re buying “cheap” or “underloved” stocks. But there’s something to be said about EES’ mission of investing in small-cap Russell 2000-indexed companies that actually produce profits. EES allows you to buy into small caps that, via the virtue of earnings, have real, tangible value. And hey — you can’t have a real price-to-earnings ratio without earnings!
Expenses: 0.38 percent
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8 ETFs for Investors Who Love Value originally appeared on usnews.com
