U.S. Markets close in 1 hr 33 mins

A Spread of Top-Ranked Value ETFs for the Current Market

Sweta Killa

Volatility has been playing foul in Wall Street over the past month thanks to an aggravating U.S.-Sino trade war, geopolitical tensions and global growth concerns (read: Low Volatility ETFs for Turbulent Times).

Trade tensions spiked earlier this month after President Donald Trump unexpectedly threatened to impose a new tariff of 10% on the remaining $300 billion of Chinese goods effective Sep 1. In retaliation, Beijing allowed its currency to sharply lose value, raising fears of a currency war. Per Bloomberg, the White House is holding off on licensing decisions for American companies to restart business with Huawei Technologies.

The tit-for-tat tariff battle between the world's two largest economies could cause further damage to the global economy, sparking fears of recession. According to Refinitiv data, the closely watched yield spread between U.S. 2-year and 10-year notes narrowed to its smallest difference since at least 2010. This signals a recession.

Additionally, a slew of downbeat economic data across the globe also resulted in stock market decline. The U.S. ISM manufacturing index dropped for the fourth straight month in July to record the lowest reading since August 2016. The U.S. non-manufacturing (services) index also dropped last month. United Kingdom’s economy shrank for the first time in more than six years in the second quarter and producer-price index in Asian country contracted for the first time in nearly three years.

Further, the possibility of snap elections in Italy, rising concerns about the pro-democracy protests in Hong Kong, and a plunge in Argentina's currency and stock markets added to the chaos (read: 5 Multi-Asset ETFs to Consider Now).

In such a scenario, value investing seems appealing to investors at present.
 
Why Value?

Value stocks have strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued by the market. These seek to capitalize on inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with growth and blend counterparts. Additionally, value stocks are less susceptible to trending markets and their dividend payouts offer safety in times of market turbulence.

Notably, these stocks outperform the growth ones across all asset classes when considered on a long-term investment horizon (read: Asian Shares Tumble on Recessionary Fears: ETFs in Focus).

Given this, we have presented a bunch of ETFs with a top Zacks ETF Rank #1 (Strong Buy) that will likely outperform in the coming weeks, especially amid the current turmoil.

Vanguard Value ETF VTV

This fund seeks to track the CRSP US Large Cap Value Index, charging investors 4 bps in fees and expenses. Holding 350 stocks in its basket, it has AUM of $48.2 billion.  

iShares Russell 1000 Value ETF IWD

This ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies by tracking the Russell 1000 Value Index. It has amassed $38.1 billion in its asset base and charges 19 bps in annual fees.

SPDR Dow Jones Industrial Average ETF DIA

This ETF follows the Dow Jones Industrial Average index, which is composed of 30 "blue-chip" U.S. stocks. It has AUM of $21.4 billion and charges 17 bps in annual fees (read: How to Hedge Your Portfolio With ETFs Amid Rising Volatility).

Vanguard Mid-Cap Value ETF VOE

This fund targets the U.S. mid-cap segment and follows the CRSP US Mid Cap Value Index. It charges 7 bps in fees and has AUM of $9.1 billion.

Vanguard Mega Cap Value ETF MGV

This fund offers diversified exposure to the largest value stocks in the U.S. market, charging 7 bps in fees from investors. It has been able to manage assets worth $2.5 billion.

Vanguard Russell 1000 Value ETF VONV

With AUM of $1.9 billion, this ETF follows the Russell 1000 Value Index and charges investors 12 bps in annual fees.

SPDR S&P 400 Mid Cap Value ETF MDYV

With AUM of $1.4 billion, this ETF offers pure exposure to the mid-cap value segment of the U.S. equity market by tracking the S&P Mid Cap 400 Value Index. It charges 15 bps in annual fees (read: Trump Threatens New Tariff: 5 ETF Buying Zones).

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>