A smart beta exchange traded fund, the Deep Value ETF (DVP) debuted on 09/22/2014, and offers broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Exchange Traded Concepts. DVP has been able to amass assets over $280.25 M, making it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the TWM Deep Value Index.
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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.59%.
It's 12-month trailing dividend yield comes in at 2.47%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 40.10% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Telecom and Information Technology round out the top three.
When you look at individual holdings, Viacom Inc New (VIAB) accounts for about 7.69% of the fund's total assets, followed by Gap Inc (GPS) and Western Digital Corp (WDC).
Its top 10 holdings account for approximately 57.33% of DVP's total assets under management.
Performance and Risk
The ETF has gained about 9.85% and was up about 2.50% so far this year and in the past one year (as of 04/03/2019), respectively. DVP has traded between $28.82 and $37.21 during this last 52-week period.
The fund has a beta of 1.07 and standard deviation of 17.44% for the trailing three-year period, which makes DVP a high risk choice in this particular 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 $38.23 B in assets, Vanguard Value ETF has $46.78 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.
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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
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