Value investing is the practice of identifying undervalued stocks in an effort to capitalize on the market’s underestimation of their intrinsic value. Typically, investors look to a company’s fundamentals, comparing them against similar businesses in order to identify potentially undervalued stocks. Value exchange-traded funds (ETFs) allow investors to buy baskets of value stocks with a single investment. An ETF can offer a more diversified way to invest in a value strategy because your money is spread across many stocks.
Key Takeaways
- Value stocks underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are RZV, RFV, and IVOV.
- The top holdings of these ETFs are CONSOL Energy Inc., Avnet Inc., and East West Bancorp Inc., respectively.
There are 34 distinct value ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). For the purposes of our list, Investopedia is defining value funds as smart beta funds that broadly follow a value factor strategy.
Value stocks, as measured by the Russell 1000 Value Index, have underperformed the broader market with a total return of 25.0% over the past 12 months compared to the S&P 500’s total return of 34.4%, as of March 1, 2021. The best-performing value ETF, based on performance over the past year, is the Invesco S&P SmallCap 600 Pure Value ETF (RZV). We examine the top 3 best value ETFs below. All numbers below are as of March 2, 2021.
Invesco S&P SmallCap 600 Pure Value ETF (RZV)
- Performance over 1-Year: 65.4%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.52%
- 3-Month Average Daily Volume: 18,866
- Assets Under Management: $209.8 million
- Inception Date: March 7, 2006
- Issuer: Invesco
RZV targets the S&P SmallCap 600 Pure Value Index, an index of small-cap companies selected from the S&P SmallCap 600 based on book value-to-price ratio, earnings-to-price ratio, and sales-to-price ratio. The average market capitalization of a company in the fund’s portfolio is about $962 million. RZV holds about 168 stocks in a portfolio that is evenly distributed, with the largest holding accounting for under 1.6% of assets. The top three holdings of the fund include CONSOL Energy Inc. (CEIX), an energy company with interests in coal; QEP Resources Inc. (QEP), a natural gas exploration and production company; and Aaron’s Company Inc. (AAN), a lease-to-own retailer offering furniture, electronics, and similar products.
Invesco S&P MidCap 400® Pure Value ETF (RFV)
- Performance over 1-Year: 54.5%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 1.36%
- 3-Month Average Daily Volume: 10,513
- Assets Under Management: $92.8 million
- Inception Date: March 7, 2006
- Issuer: Invesco
RFV is structured similarly to RZV above, although it tracks the S&P MidCap 400 Pure Value Index. The index targets mid-cap companies from the S&P 400, identifying them by book value-to-price ratio, earnings-to-price ratio and other criteria. The average market capitalization of a company in the RFV portfolio is about $4.0 billion. RFV holds about 107 stocks and distributes its funds evenly across its holdings. The top holdings for the fund include Avnet Inc. (AVT), a distributor of electronic components; Kohl’s Corporation (KSS), a department store retailer; and Domtar Corp. (UFS), a manufacturer of paper and pulp products.
Vanguard S&P Mid-Cap 400 Value ETF (IVOV)
- Performance over 1-Year: 38.0%
- Expense Ratio: 0.15%
- Annual Dividend Yield: 2.18%
- 3-Month Average Daily Volume: 19,956
- Assets Under Management: $601.5 million
- Inception Date: September 9, 2010
- Issuer: Vanguard
IVOV targets stocks in the S&P MidCap 400 Value Index, an index made up of value companies from the S&P 400. The fund is weighted heavily in three sectors: financial (21.8%), industrial (15.9%), and consumer discretionary (14.4%). Assets are very evenly distributed across the roughly 308 holdings in IVOV’s portfolio, with the largest holding accounting for just 0.83% of assets. Nonetheless, the top three holdings of IVOV include East West Bancorp Inc. (EWBC), a personal banking, business loans, and mortgage provider; Owens Corning (OC), a maker of insulation, roofing materials and fiberglass composites; and Omega Healthcare Investors Inc. (OHI), a REIT that targets skilled nursing and assisted living facilities.
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ETFdb.com. "RFV Invesco S&P MidCap 400® Pure Value ETF." Accessed Mar. 2, 2021.
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