ETFs to buy for value, not growth.
The volatile year for stocks continues, with growth darling Netflix (ticker: NFLX) suffering a terrible run after its recent earnings report. Big moves like that show your portfolio can lurch lower unexpectedly. For investors concerned about volatility or worried the nearly 10-year-old bull market is running out of gas, it may be time to seek the stability of value investments. Unlike growth stocks that find favor with traders thanks to impressive expansion in sales and profits, value plays are investments with clear intrinsic worth — even if they may not set the world on fire with new ideas or products. Here are nine value exchange-traded funds to consider.
SPDR Portfolio S&P 500 Value ETF (SPYV)
As the ticker symbol implies, this is a value twist on the massively popular SPDR S&P 500 ETF (SPY). Instead of the full list of S&P 500 index components, this ETF is centered on 300-some stocks that exhibit the strongest value characteristics based on book value, price-to-earnings ratios, price-to-sales ratios and other metrics. As a result, top holdings exclude tech names like Apple (AAPL) and instead bias toward the likes of JP Morgan Chase (JPM) and Exxon Mobil (XOM).
iShares Russell Mid-Cap Value ETF (IWS)
You can argue that there’s not much “value” to be had in the largest and most widely-held names on Wall Street. How do you find a bargain in a stock that is so closely watched, and how can you claim it’s not priced accurately by the market? Some investors, then, like to gravitate toward smaller value plays. That’s exactly what this iShares fund does by focusing only on mid-sized corporations such as Suntrust Banks (STI) and packaged foods giant Archer Daniels Midland Co. (ADM) instead of the mega-cap stocks that are more popular.
Vanguard Small-Cap Value ETF (VBR)
If you really want to get off the beaten trail then there’s the VBR fund with components you may not know, including insurer WellCare Health Plans (WCG) and pipeline company Atmos Energy (ATO) among others. The challenge here is that the smaller you go, the more risk you take on. These companies may indeed rate favorably on value metrics but they typically don’t have the deep pockets or access to capital of larger firms. Still, as an ETF with more than 800 holdings, the diversification of this fund may smooth out the volatility of individual member stocks.
Utilities Select Sector SPDR ETF (XLU)
Instead of slicing up the universe of value stocks by size, you can also zero in on a sector that exemplifies value characteristics. Utilities are the perfect example, since these providers are pretty close to legalized monopolies. And with a highly regulated marketplace, the chance of an upstart challenging these for-profit corporations is close to zero. The trade-off is a lack of growth. Sure, populations may get a bit larger and businesses may use a bit more power in boom times, but you won’t see much wiggle other than that. The reduced volatility is a trade many investors are willing to make.
SPDR S&P Telecom ETF (XTL)
A similar twist on value investing can come via a broad play on telecommunications stocks. Particularly in the U.S., there’s not a lot of growth left for cell phone subscriptions or high-speed internet access. Be warned that the XTL fund is not completely free of volatility as the telecom sector continues to see some fireworks related to acquisitions. A big merger in late 2017 between CenturyLink (CTL) and Level 3 made waves, as have more recent overtures by T-Mobile (TMUS) to acquire wireless competitor Sprint Corp. (S). Still, telecom remains a pretty sleepy sector ripe for value investors.
iShares MSCI EAFE Value ETF (EFV)
Value hunters should check out the interesting picks across the Atlantic. The EFV fund fits globe-trotting investors, with a strategy that covers Europe, Australia and the Far East. It is very much focused on developed markets. The largest region of investment is Japan at 24 percent of the portfolio, followed by the United Kingdom at 23 percent. Top stocks are familiar value plays including bank HSBC Holdings (HSBC) and drugmaker Novartis (NVS). As a result, this ETF helps add an international flavor to your portfolio without the volatility risk of emerging market funds.
Cambria Global Value ETF (GVAL)
If you think there’s value overseas, however, then why even worry about geography and simply select the stocks that have the most intrinsic worth and the best metrics? That’s the philosophy behind this Cambria fund, which can span up to 45 different countries based on where the opportunity is. At present, holdings include familiar names like generic drugmaker Teva Pharmaceuticals Industries (TEVA) and off-the-beaten-path picks including Czech energy stock Unipetrol that aren’t easily purchased by U.S. investors. That allows a truly comprehensive approach to value investing in a much easier way than picking individual stocks yourself.
Alpha Architect U.S. Quantitative Value ETF (QVAL)
Another broad value fund is QVAL, which focuses on large and smaller-sized companies that meet certain value characteristics — as long as they are U.S. based. This creates quite a mashup, with biggies like $200 billion telecom behemoth Verizon Communications (VZ) layered in there with overlooked picks like $3 billion retailer Signet Jewelers Ltd. (SIG). But despite the variation in market value, all of the nearly 50 positions are weighted similarly with no single pick taking up more than about 2.5 percent of the total portfolio. That may be appealing to investors looking for a one-stop-shop for value.
Deep Value ETF (DVP)
Another fund that looks anywhere for value investments is DVP. But it’s also content putting its eggs in a relatively small basket. With only 20 picks at present and the duo of hard disk manufacturer Seagate Technology (STX) and department store Macy’s (M) making up more than 20 percent of the entire portfolio, this ETF is focused. Remember, you are very much at the mercy of this fund’s methodology. It’s one thing to bet on a sector or region that rolls over, but another when a hand-picked portfolio underperforms due to its strategy.
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9 Value ETFs to Buy for Stability originally appeared on usnews.com
