Value investing is the practice of trying to identify undervalued stocks in an effort to capitalize on the market's underestimation of their intrinsic value. Typically, investors look to a company's fundamentals, comparing them against similar businesses in order to identify potentially undervalued stocks. Value exchange-traded funds (ETFs) allow investors to buy baskets of value stocks with a single investment. An ETF can offer a more diversified way to invest in a value strategy because your money is spread across many stocks. In the past year, value ETFs as represented by the benchmark iShares S&P 500 Value ETF (IVE) have significantly underperformed the broader market. IVE has provided 1-year trailing total returns of 4.0% as compared with 19.9% for the S&P 500.
- Value ETFs have significantly underperformed the broader market in the past year.
- The top ETFs based on 1-year trailing total returns are FSZ, IVAL, and DFE.
- The top holdings for these funds are Bucher Industries AG, Fortescue Metals Group Ltd., and BE Semiconductor Industries NV, respectively.
There are 28 value ETFs, not including leveraged and inverse funds, as well as those with under $50 million in assets under management (AUM). The best value ETF for Q4 2020 is the First Trust Switzerland AlphaDex Fund (FSZ). Below, we'll explore the top 3 value ETFs as measured by 1-year trailing total returns. Note that we focus only on equity funds here. All figures are as of August 19, 2020.
- 1-Year Trailing Total Returns: 14.3%
- Expense Ratio: 0.80%
- Annual Dividend Yield: 1.67%
- 3-Month Average Daily Volume: 5,443
- Assets Under Management: $71.5 million
- Inception Date: February 14, 2012
- Issuing Company: First Trust
FSZ is a multi-cap fund targeting Swiss companies. The fund tracks the NASDAQ AlphaDEX Switzerland Index, which selects stocks for inclusion based on a group of factors including price appreciation, one-year sales growth, and sales to price, among others. The ETF's top holdings, aside from a cash component, include Bucher Industries AG (BUCN), the machinery industry company; Bachem Holding AG (BANB), the pharmaceutical and technology company; and Logitech International SA (LOGN), the computer peripheral and software maker.
- 1-Year Trailing Total Returns: 6.0%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 1.61%
- 3-Month Average Daily Volume: 14,509
- Assets Under Management: $89.9 million
- Inception Date: December 17, 2014
- Issuing Company: Alpha Architect
IVAL is a multi-cap fund targeting global equities from developed markets. The fund seeks to invest in the cheapest and highest quality value stocks, utilizing an automated selection system to curate a portfolio of 40 to 50 holdings. The ETF's top holdings include Fortescue Metals Group Ltd. (FSUMF), the Australian iron ore company; Anglo American PLC (NGLOY), the South African mining company; and Dialog Semiconductor PLC (DLGNF), the British semiconductor firm.
- 1-Year Trailing Total Returns: 5.3%
- Expense Ratio: 0.58%
- Annual Dividend Yield: 3.01%
- 3-Month Average Daily Volume: 30,758
- Assets Under Management: $330.4 million
- Inception Date: June 16, 2006
- Issuing Company: WisdomTree
DFE is a fund targeting primarily small-cap European companies. The fund tracks the WisdomTree Europe SmallCap Dividend Index, which weights holdings according to annual cash dividends paid. The ETF's top three holdings include BE Semiconductor Industries NV (BESIY), the Dutch semiconductor company; Siltronic AG (SSLLF), the German maker of semiconductor components; and Bpost SA (BPOSY), the Belgian mail delivery company.