Making its debut on 09/22/2014, smart beta exchange traded fund Deep Value ETF (DVP) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Twm Funds. It has amassed assets over $287.84 M, making it one of the average sized ETFs in the Style Box - Large Cap Value. DVP seeks to match the performance of the TWM Deep Value Index before fees and expenses.
TWM Deep Value Index is constructed using an objective, rules-based methodology that begins with an initial universe that mirrors the companies listed on the S&P 500 Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.80% for this ETF, which makes it one of the most expensive products in the space.
It has a 12-month trailing dividend yield of 2.43%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For DVP, it has heaviest allocation in the Consumer Discretionary sector --about 40.10% of the portfolio --while Telecom and Information Technology round out the top three.
Looking at individual holdings, Viacom Inc New (VIAB) accounts for about 7.94% of total assets, followed by Gap Inc (GPS) and Western Digital Corp (WDC).
Its top 10 holdings account for approximately 57.47% of DVP's total assets under management.
Performance and Risk
So far this year, DVP return is roughly 11.51%, and is up about 2.56% in the last one year (as of 04/25/2019). During this past 52-week period, the fund has traded between $28.82 and $37.21.
DVP has a beta of 1.07 and standard deviation of 17.37% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 21 holdings, it has more concentrated exposure than peers.
Deep Value ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $38.95 B in assets, Vanguard Value ETF has $47.51 B. IWD has an expense ratio of 0.20% and VTV charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Deep Value ETF (DVP): ETF Research Reports
Western Digital Corporation (WDC) : Free Stock Analysis Report
Viacom Inc. (VIAB) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
The Gap, Inc. (GPS) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research