Investors are piling into value ETFs.
With the stock market indexes mostly running negative this year, investors are looking for safe havens. One of them, in a broader sense, is value stocks — particularly large-cap and mid-cap value.
The S&P 500 Value Index is essentially flat year-to-date, while the S&P 500 Growth index is down about 8%. The S&P 500 overall is off roughly 4%.
Further, the Russell 1000 value index is up about 2%, while the Russell 1000 Growth Index is down about 9% YTD. The overall Russell 1000 has dropped around 4%.
So, generally speaking, value stocks have outperformed, as investors are piling into value ETFs and dumping growth ETFs. But within the large swath of value funds are some exchanged traded funds (ETFs) that have beaten their benchmarks. Here are two top performing value ETFs.
1. The American Century Focused Large Cap Value ETF
The American Century Focused Large Cap Value ETF (NYSEARCA:FLV) has been one of the top performing value ETFs, rising about 5% year-to-date, beating all of its benchmarks.
This ETF is actively managed, which means it is managed by a team of portfolio managers and does not track a value index. Active management is particularly valuable these days, as professional portfolio managers handpick the stocks they feel have the best chance to outperform.
The ETF invests in large-cap U.S. companies that the portfolio managers believe are selling at a discount to their fair value. Their process is focused on identifying higher-quality companies with superior risk/reward potential.
Active ETFs only have to report holdings monthly, so at the end of February, about 23% was invested in healthcare stocks, 22% were in financials, 17% were in consumer staples, while technology and industrials accounted for 9% each. Energy stocks made up about 7%.
The four largest holdings were Johnson & Johnson (NYSE:JNJ), Unilever (NYSE:UL), Duke Energy (NYSE:DUK), and JPMorgan Chase (NYSE:JPM).
The ETF is up 5% YTD, 10.3% over the past 12 months, and has a five-year annualized return of 12.2%.
2. Invesco Large Cap Value ETF
The Invesco Large Cap Value ETF (NYSEARCA:PWV) is not actively managed, rather its tracks the Dynamic Large Cap Value Intellidex. But this is not your typical value index, as it employs rigorous screens to find the best value stocks.
Specifically, the index, and by extension the ETF, is composed of 50 large-cap U.S. stocks with strong value characteristics and the most capital appreciation potential. To identify those stocks, the index applies a 10 factor style isolation process.
The result has been outperformance, as the ETF is up 4% YTD, beating its benchmarks. It has gained about 8% over the past 12 months, and has a robust average annual return of 15.2% over the past five years.
Compared to the other ETF, this has a higher weighting in financials, at 31%, as well as energy at 19%. Healthcare stocks make up about 15% of the portfolio, followed by tech stocks and consumer staples at 10% each.
The four largest holdings are AbbVie (NYSE:ABBV), Exxon-Mobil (NYSE:XON), Chevron (NYSE:CVX), and Johnson and Johnson (NYSE:JNJ).
It should be noted that international value stocks have significantly outperformed U.S. value stocks. We’ll examine the top international value ETFs in the future.
