Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to focus some of your investing on mid-sized value stocks that exhibit low book-value-to-price and sales-to-price ratios, as well as dividend yields, the Guugenheim S&P 500 Pure Value ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Guugenheim ETF’s expense ratio — its annual fee — is a low 0.35%. The fund is on the small side, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed rather well, beating the S&P 500 over the past three and five years. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
More than a handful of its “pure value” companies had strong performances over the past year. Genworth Financial Inc (NYSE:GNW), for example, doubled in value, as did Western Digital Corp (NASDAQ:WDC). My colleague Robert Eberhard called Genworth Financial Inc (NYSE:GNW) cheap back in March, but it still sports a forward P/E ratio near eight, well below its five-year average. It has been making itself more attractive, in part, by selling off its wealth-management business. It’s also working on raising its rates for its long-term care insurance, as that has become quite costly (causing some rivals to simply exit the business) — and it’s cutting costs by laying off several hundred people, too. The company is positioned to profit from a rebound in housing, as well, as it insures mortgages. On the negative side, it was recently included in a probe into unpaid benefits.
Western Digital Corp (NASDAQ:WDC), along with Seagate Technology PLC (NASDAQ:STX), controls about 85% of the hard-disk drive market. Despite worries about a shrinking PC market, bulls see a massive and growing need for storage, and view hard-disk drives as inexpensive solutions for that. With a forward P/E ratio near seven, Western Digital Corp (NASDAQ:WDC) appears undervalued indeed, and it has boosted its presence in solid-state drives by a recent purchase of STEC, Inc. (NASDAQ:STEC). The stock yields 1.6%.