Renewed Affinity for iShares Value ETF ‘IWD’
This article was originally published on ETFTrends.com.
As has been widely documented, value stocks are struggling this year, but the broader market's October woes are plaguing once beloved growth and momentum fare, potentially opening the door for a long-awaited value resurgence.
Some investors have been turning to value exchange traded funds, such as the iShares Russell 1000 Value ETF (IWD) , as shelter-from-the-storm plays amid October's increased volatility. IWD is off almost 4% year-to-date.
IWD seeks to track the investment results of the Russell 1000® Value Index, which measures the performance of large- and mid- capitalization value sectors of the U.S. equity market. IWD generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.
“Investors poured $423 million into the $35 billion iShares Russell 1000 Value ETF, ticker IWD, last week, the second largest weekly inflow this year and most since July,” reports Bloomberg. “The BlackRock Inc. fund has taken in $580 million in October, putting it on pace for its best month of inflows this year. It tracks the Russell 1000 Value Index, which is made up of stocks with low price-to-book ratios.”
Value Advantages
Conventional wisdom dictates that, over the long-term, value stocks outperform. Well, the length of the current bull market in U.S. stocks qualifies as “long-term,” and for much of this move higher, value stocks have been trailing their growth counterparts.
“As growth-oriented areas of the market like technology get pummeled in the wake of trade concerns and rising interest rates, more defensive and value-oriented plays have outperformed,” according to Bloomberg. “Utilities and consumer staples are the only two S&P 500 sectors in the green this month. The selloff has also brought the broad market benchmark to its cheapest level since 2016, inspiring many to go bargain hunting.”
The $35.16 billion IWD holds 725 stocks, nearly 14% of which are consumer staples and utilities names. The allocates almost 38% of its combined weight to the financial services and healthcare sectors.
Value stocks usually trade at lower prices relative to fundamental measures of value, like earnings and the book value of assets. On the other hand, growth-oriented stocks tend to run at higher valuations since investors expect the rapid growth in those company measures, but more are growing wary of high valuations.
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