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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
DVP is managed by Deep Value Etf, and this fund has amassed over $282.22 M, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, DVP 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for DVP are 0.80%, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.59%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Consumer Discretionary sector - about 32.10% of the portfolio. Information Technology and Telecom round out the top three.
Looking at individual holdings, Viacom Inc New (VIAB) accounts for about 8.69% of total assets, followed by Western Digital Corp (WDC) and Cvs Health Corp (CVS).
The top 10 holdings account for about 57.71% of total assets under management.
Performance and Risk
Year-to-date, the Deep Value ETF return is roughly 6.70% so far, and is down about -7.79% over the last 12 months (as of 07/24/2019). DVP has traded between $28.49 and $36.30 in this past 52-week period.
DVP has a beta of 1.15 and standard deviation of 17.08% 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 $39.56 B in assets, Vanguard Value ETF has $49.80 B. IWD has an expense ratio of 0.20% 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
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
CVS Health Corporation (CVS) : Free Stock Analysis Report
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