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 long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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 sponsored by Deep Value Etf. It has amassed assets over $286.81 M, making it one of the average sized ETFs in the Style Box - Large Cap Value. 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.80%.
The fund has a 12-month trailing dividend yield of 2.84%.
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 23.70% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Information Technology and Healthcare round out the top three.
Looking at individual holdings, Cardinal Health Inc (CAH) accounts for about 7.78% of total assets, followed by Franklin Res Inc (BEN) and Macys Inc (M).
The top 10 holdings account for about 58.25% of total assets under management.
Performance and Risk
Year-to-date, the Deep Value ETF has gained about 2.28% so far, and is down about -6.04% over the last 12 months (as of 10/22/2019). DVP has traded between $27.93 and $35.13 in this past 52-week period.
The ETF has a beta of 1.18 and standard deviation of 18.04% for the trailing three-year period, making it 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 $39.92 B in assets, Vanguard Value ETF has $50.24 B. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
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
Franklin Resources, Inc. (BEN) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
Macy's, Inc. (M) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
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