The Year’s Top 3 Value ETFs as of August 2023
Equity markets have performed remarkably well in 2023 and could continue to defy expectations. Still, volatility or sour earnings can make investors hesitant about betting on a particular business or industry. If an investor is looking for a way to invest without putting their hopes into one company, they might want to consider value exchange-traded funds (ETFs). ETFs are collections of stocks or other securities that track an index, a sector, or a theme.
One of the strategies that investors can use to select ETFs is value investing. Value investing is based on the idea of finding undervalued stocks that have strong fundamentals, such as earnings, dividends, or cash flow. Value ETFs will provide investors with exposure to these kinds of stable businesses.
In this article, we will introduce 3 value ETFs that have performed well in 2023. These ETFs focus on different segments of the U.S. stock market and offer exposure to various industries and sectors.
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iShares Core S&P Small-Cap ETF (IJR)
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iShares Core S&P Small-Cap ETF (NYSEARCA:IJR) is a value ETF that has performed well in 2023, and it tracks the performance of the S&P SmallCap 600 Index, which consists of small-cap stocks that represent about 3% of the U.S. equity market capitalization. IJR has over $72 billion in assets under management and holds 689 stocks in its portfolio.
Some holdings include Yelp (NYSE:YELP), Abercrombie & Fitch (NYSE:ANF), and Phillips Edison & Company (NASDAQ:PECO). These are companies that have a combination of strong growth potential along with innovative products or services.
IJR has returned 9% year-to-date and has benefited from the increased risk appetite and optimism among investors as they have poured back into the market in 2023. IJR has the potential to continue to do well this year because it offers exposure to dynamic and resilient companies that have proven their ability to adapt to changing market environments and consumer preferences.
Vanguard Value ETF (VTV)
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Vanguard Value ETF (NYSEARCA:VTV) is one of the largest and most popular value ETFs in the U.S. It tracks the performance of the CRSP US Large Cap Value Index, which consists of large-cap stocks that exhibit value characteristics.
VTV has over $102 billion in assets under management and holds 345 stocks in its portfolio. Some of the top holdings of VTV include household names, such as Berkshire Hathaway (NYSE:BRKA), Johnson & Johnson (NYSE:JNJ), JPMorgan Chase (NYSE:JPM), Exxon Mobil (NYSE:XOM), and Procter & Gamble (NYSE:PG). These are all well-established American companies that have stable earnings and dividends, as well as competitive advantages in their respective industries.
Although VTV has returned only 3% year-to-date, the value ETF has appreciated nearly 40% over a 3-year period, outperforming both the S&P 500 and Nasdaq. Due to holding names like Exxon Mobil and P&G, VTV has broadly benefited from elevated commodities prices and higher inflation felt by consumers. VTV’s exposure to the U.S. banking sector, however, created headwinds for the ETF as the banking sector experienced much turmoil earlier this year. Nonetheless, the U.S. economy has not only emerged from a banking crisis but has also recently defied expectations of economic growth. These positive trends could spell continued benefits for those investing in the companies that undergird much of America’s economy.
SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
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SPDR Portfolio S&P 500 High Dividend ETF (NYSEARCA:SPYD) is a value ETF that has had lackluster price appreciation but maintains a decent dividend. The ETF tracks the performance of the S&P 500 High Dividend Index, which consists of the top 80 dividend-paying stocks within the S&P 500 index. SPYD has $6.75 billion in assets under management and holds more than 80 stocks in its portfolio. Some of the top holdings of SPYD are Seagate Technology (NASDAQ:STX), International Paper Company (NYSE:IP), and Boston Properties (NYSE:BXP). These are companies that have relatively high dividend yields, which indicate their ability to both generate consistent cash flow and return value to shareholders.
SPYD’s shares have lost value year-to-date but have maintained a dividend yield of 4.68%. In times of economic uncertainty, dividend stocks will be more attractive for income-seeking investors who desire income stability. SPYD could also benefit from the potential rotation into value stocks, which have higher dividend payouts than growth stocks.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.
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