Is Deep Value ETF (DVP) a Strong ETF Right Now?
Launched on 09/22/2014, the Deep Value ETF (DVP) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $271.74 M, this makes it one of the average sized ETFs in the Style Box - Large Cap Value. DVP is managed by Exchange Traded Concepts. This particular fund 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for DVP are 0.59%, which makes it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.58%.
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.
For DVP, it has heaviest allocation in the Consumer Discretionary sector --about 38.90% of the portfolio --while Information Technology and Materials round out the top three.
Looking at individual holdings, Viacom Inc New (VIAB) accounts for about 8.06% of total assets, followed by Gap Inc (GPS) and Western Digital Corp (WDC).
DVP's top 10 holdings account for about 58.91% of its total assets under management.
Performance and Risk
The ETF return is roughly 7.58% so far this year and is down about -4.58% in the last one year (as of 03/12/2019). In the past 52-week period, it has traded between $28.82 and $37.21.
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.
Alternatives
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 $37.84 B in assets, Vanguard Value ETF has $46 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.
Bottom Line
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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