A Spread of Top-Ranked Value ETFs to Bet in 2023
After the biggest annual loss since 2008, Wall Street staged a strong rally at the start of 2023 on hopes of easing inflation and the Fed’s slower rate hike path. However, recession fears continued to weigh on stocks.
Against this backdrop, value investing seems a prudent choice as value stocks provide investors some shelter from deep losses. That being said, iShares Russell 1000 Value ETF IWD, which targets the value segment, has risen 2.8% in the initial days of 2023 compared with a gain of 1.6% for its growth counterpart iShares Russell 1000 Growth ETF IWF.
While there are many options available in this space, investors could tap the trends with ETFs having a Zacks Rank #1 (Strong Buy). Vanguard Value ETF VTV, iShares S&P 500 Value ETF IVE, SPDR Portfolio S&P 500 Value ETF SPYV, Schwab U.S. Large-Cap Value ETF SCHV and iShares Edge MSCI USA Value Factor ETF VLUE look like compelling choices.
Why Value?
Value stocks have strong fundamentals — earnings, dividends, book value and cash flow — and trade below their intrinsic value. These seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. Value stocks are less susceptible to trending markets and their dividend payouts offer safety in times of market turbulence.
Current Market Trends
Optimism over cooling inflation and hopes that the Fed will soon wrap up its inflation-fighting campaign have bolstered the risk appetite. The latest jobs report has added to the strength. The United States added 223,000 jobs in December and the unemployment rate fell to 3.5%, matching a 50-decade low. Meanwhile, wage growth lost momentum, which gave investors hope that the Fed can ease off on its interest-rate increases (read: 5 Tech ETFs Riding High on Sectors' Comeback to Start 2023).
However, market participants are seeing recession anytime soon as higher interest rates have started to hurt economic growth. The International Monetary Fund warned that a third of the global economy would be in a recession given no signs of abatement of the ongoing conflict in Ukraine, spiraling inflation, higher interest rates and a surge in coronavirus infections in China. The year 2023 would be "tougher" than last year as the United States, European Union and China may see their economies slow down.
Per a Wall Street Journal survey, there is a 63% chance of recession this year. And a survey of economists and investors by the Federal Reserve Bank of Philadelphia shows the expectations that the gross domestic product will fall in three or four quarters are by far the highest since it started in 1968. Big banks are also expecting that an economic downturn is fast approaching. More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting that the United States will face a recession in 2023.
Vanguard Value ETF (VTV)
Vanguard Value ETF targets the value segment of the broad U.S. stock market and follows the CRSP US Large Cap Value Index. The product holds 340 stocks in its basket, with each accounting for no more than 3.1% of the assets. Vanguard Value ETF has AUM of $101 billion and charges 4 bps in annual fees. The product trades in volume of 3 million shares per day on average (read: 5 Winning ETF Ideas for Your Portfolio in 2023).
iShares S&P 500 Value ETF (IVE)
With AUM of $25.2 billion, iShares S&P 500 Value ETF follows the S&P 500 Value Index, holding 407 stocks in its basket. It is widely spread across components, with none accounting for less than 4.5% of assets. iShares S&P 500 Value ETF trades in a volume of 1 million shares per day on average and charges 18 bps in annual fees.
SPDR Portfolio S&P 500 Value ETF (SPYV)
SPDR Portfolio S&P 500 Value ETF tracks the S&P 500 Value Index, charging investors 4 bps in annual fees. It holds 407 stocks in its basket, with each accounting for no more than 4.5% of assets. SPDR Portfolio S&P 500 Value ETF has amassed $15.7 billion in its asset base and sees an average daily volume of 3.3 million shares. It charges 4 bps in annual fees (read: 6 ETF Predictions for 2023).
Schwab U.S. Large-Cap Value ETF (SCHV)
Schwab U.S. Large-Cap Value ETF follows the Dow Jones U.S. Large-Cap Value Total Stock Market Index, which includes the components ranked 1-750 by full market capitalization and classified as "value" based on a number of factors. It holds 520 stocks in its basket, with none making up for more than 2.8% share. Schwab U.S. Large-Cap Value ETF has AUM of $10.2 billion and charges 4 bps in annual fees. It trades in an average daily volume of 513,000 shares.
iShares Edge MSCI USA Value Factor ETF (VLUE)
iShares Edge MSCI USA Value Factor ETF offers exposure to large- and mid-cap U.S. stocks with lower valuations based on fundamentals and tracks the MSCI USA Enhanced Value Index. It holds 150 stocks in its basket, with each accounting for less than 5.2% of assets. iShares Edge MSCI USA Value Factor ETF has amassed $7.7 billion in its asset base and charges 15 bps in annual fees. It trades in an average daily volume of 481,000 shares.
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Vanguard Value ETF (VTV): ETF Research Reports
Schwab U.S. LargeCap Value ETF (SCHV): ETF Research Reports
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
iShares S&P 500 Value ETF (IVE): ETF Research Reports
iShares MSCI USA Value Factor ETF (VLUE): ETF Research Reports
SPDR Portfolio S&P 500 Value ETF (SPYV): ETF Research Reports
