Is Fidelity Value Factor ETF (FVAL) a Strong ETF Right Now?
The Fidelity Value Factor ETF (FVAL) made its debut on 09/12/2016, and is a smart beta exchange traded fund that provides 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.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Fidelity. It has amassed assets over $520.37 million, 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 Fidelity U.S. Value Factor Index before fees and expenses.
The Fidelity U.S. Value Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies that have attractive valuations.
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 on par with most peer products in the space, this ETF has annual operating expenses of 0.29%.
The fund has a 12-month trailing dividend yield of 1.77%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 25.80% of the portfolio. Financials and Healthcare round out the top three.
When you look at individual holdings, Apple Inc (AAPL) accounts for about 7.87% of the fund's total assets, followed by Microsoft Corp (MSFT) and Alphabet Inc Cl A (GOOGL).
Its top 10 holdings account for approximately 33.91% of FVAL's total assets under management.
Performance and Risk
The ETF has added about 7.91% and was up about 10.61% so far this year and in the past one year (as of 10/24/2023), respectively. FVAL has traded between $42.39 and $50.98 during this last 52-week period.
FVAL has a beta of 1.05 and standard deviation of 17.75% for the trailing three-year period. With about 130 holdings, it effectively diversifies company-specific risk.
Alternatives
Fidelity Value Factor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard High Dividend Yield ETF (VYM) tracks FTSE High Dividend Yield Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Vanguard High Dividend Yield ETF has $46.53 billion in assets, Vanguard Value ETF has $95.37 billion. VYM has an expense ratio of 0.06% 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.
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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Fidelity Value Factor ETF (FVAL): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
