Value investing has seen a resurgence in interest, as growth stocks have dominated the market in recent years. With stock prices at record highs and trading at high multiples, investors are turning to funds with a value-oriented approach for more attractive opportunities.
One such fund is the Vanguard Value ETF (NYSEARCA:VTV), which offers exposure to more defensive sectors like healthcare and has relatively low multiples, with a P/E ratio of around 16x. This fund focuses on larger capitalization companies, providing a layer of earning stability and making it an intriguing option for investors seeking diversification with value strategies.
The ETF aims to track the CRSP US Large Cap Value index, which focuses on value stocks within large capitalization companies in the U.S. market. By applying various value metrics like book-to-price ratio, earnings-to-price ratios, dividend yield, and sales-to-price ratio, the index ranks companies based on their value characteristics. VTV currently holds allocations in 342 companies, with top holdings including Berkshire Hathaway, JPMorgan, and Exxon Mobil.
Compared to other large-cap ETFs following a value approach, VTV stands out with its sector allocations. The fund has a larger allocation to financial services, healthcare, and industrials, while being underweight in technology and communication services. This sector allocation strategy aligns with the current trend among value ETFs towards low-multiple sectors like financials and defensive sectors like healthcare.
Overall, VTV offers investors a compelling option for value-oriented exposure with its focus on defensive sectors and lower multiples compared to benchmark indexes. With its diverse holdings and sector allocations, the Vanguard Value ETF presents an attractive opportunity for investors looking to incorporate value strategies into their portfolios. VTV’s growth metrics, such as earnings and sales growth, are lower compared to the broader market, especially in tech names. This is not surprising given the market’s focus on specific areas like technology. When looking at the peer group, VTV’s multiples are slightly higher due to one peer’s allocation to energy and financials. However, this doesn’t change the value-oriented profile of VTV and its peers, as they all have lower multiples compared to benchmarks.
Despite VTV’s total return being below large-cap benchmarks, value strategies have historically rewarded investors with nearly double-digit returns. VTV has slightly outperformed its peer group of large-cap value ETFs. Additionally, VTV and its peers have shown lower volatility measures compared to the overall market, which is expected for value stocks. However, VTV’s Sharpe ratio, a measure of risk-adjusted return, is lower relative to benchmarks due to the market’s preference for growth over value.
In summary, VTV’s performance aligns with expectations for a value fund, with low multiples and overweight allocations in defensive sectors. DailyBubble believes that diversification is crucial, especially with high valuations in the current market environment. Funds like VTV offer investors the opportunity to remain invested while having a portion of their portfolio tilted towards value.