In this article, we discuss the 10 best value ETFs to invest in now.
Exchange-traded funds were introduced to the market in 1993. In the years since, they have come to dominate the fund industry, overtaking mutual funds as the most popular investment choice. This is remarkable considering that mutual funds have been around since almost a century — the first mutual fund was launched in 1924. ETFs are different from mutual funds since ETFs can be traded in intraday trading, just like regular equities. In contrast, mutual funds can only be traded at the end of each trading day at a calculated price.
A key statistic that highlights the strides made by ETFs in the past few decades is the sheer number of ETFs that are available for investors now compared to a few years ago, contrasted against mutual funds during the period. For example, in 2010, there were only around 950 different ETFs offered by a variety of financial advisory institutions. This number had climbed to over 2,200 by 2010, representing an increase of almost 150%. Compared to this, mutual funds only increased by around 6% in number during the 2010-2020 period.
The net assets of ETFs have also dramatically increased in value, climbing an astonishing 450% between 2010-2020. Meanwhile, the assets of mutual funds merely doubled in the same timespan. ETFs are similar to mutual funds in most respects. ETFs represent pooled investments that have leverage limitations, daily valuations, and liquidity requirements. ETFs and mutual funds are both generally very tax-efficient products. ETFs can be traded in small amounts while mutual funds usually require minimum investment amounts.
Annual ETF inflows topped over $1 trillion in value for the first time in December 2021. The inflows were driven by increasing market uncertainty amid rapid inflation, rising interest rates, and a spike in commodity prices. The global ETF assets under management touched $9.5 trillion towards the end of last year. A market tilt towards value plays in the ETF industry is also apparent amid this boom. Per Morningstar data, the net inflows into dividend ETFs in the summer of 2021 stood at nearly $25 billion.
ETFs are also a popular choice for retirement accounts. This is because ETFs offer advantages like lower expense ratios, intra-day trading availability, and lower tax exposure compared to alternatives. The adoption of the ETF rule by the SEC has also helped ETF sponsors bring their product to the market quicker than before. As market experts warn of a recession, there are few better investment vehicles than ETFs to ride the coming storm. Investors should turn their focus on value ETFs in the days ahead.
Some of the top holdings of value ETFs popular in the US include Exxon Mobil Corporation (NYSE:XOM), Microsoft Corporation (NASDAQ:MSFT), and Johnson & Johnson (NYSE:JNJ), among others discussed in detail below.
Our Methodology
The ETFs listed below are discussed with regards to their top holdings. The aim of the article is to provide readers with a basic rundown of some of the top value ETFs in the US. All the ETFs listed below trade on exchanges in the United States.
Best Value ETFs to Invest in Now
10. Vanguard Value Index Fund (NYSE:VTV)
Vanguard Value Index Fund (NYSE:VTV) is a fund that tracks the performance of the CRSP US Large Cap Value Index. The index comprises value stocks of large companies that trade on exchanges in the United States. The fund holds each stock in almost the same proportion as the weighting of the stock on the index.
One of the biggest holdings of Vanguard Value Index Fund (NYSE:VTV) is Berkshire Hathaway Inc. (NYSE:BRK-B), a conglomerate with interests in the insurance, freight rail transportation, and utility businesses. At the end of the fourth quarter of 2021, 108 hedge funds in the database of Insider Monkey held stakes worth $19.3 billion in Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 106 in the preceding quarter worth $19.4 billion.
Just like Exxon Mobil Corporation (NYSE:XOM), Microsoft Corporation (NASDAQ:MSFT), and Johnson & Johnson (NYSE:JNJ), Berkshire Hathaway Inc. (NYSE:BRK-B) is one of the value stocks on the radar of elite investors amid rising inflation.
In its Q1 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE:BRK-B) was one of them. Here is what the fund said:
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway Inc. (NYSE:BRK-B). Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway Inc. (NYSE:BRK-B) has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
9. Vanguard S&P Small-Cap 600 Value Index Fund (NYSE:VIOV)
Vanguard S&P Small-Cap 600 Value Index Fund (NYSE:VIOV) is an exchange traded fund that tracks the investment returns of the S&P SmallCap 600 Value Index which comprises a group of value companies with market capitalizations between $300 million and $2 billion that trade on exchanges in the US. The fund aims to replicate the returns of the target index.
A premier holding of Vanguard S&P Small-Cap 600 Value Index Fund (NYSE:VIOV) is Macy’s, Inc. (NYSE:M), a firm that owns and runs department stores. Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Macy’s, Inc. (NYSE:M) with 7.9 million shares worth more than $208 million.
In its Q3 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Macy’s, Inc. (NYSE:M) was one of them. Here is what the fund said:
“Meanwhile, Macy’s, Inc. (NYSE:M), an omnichannel retail organization that operates stores, websites, and mobile applications under the Macy’s, Bloomingdale’s, and Bluemercury brands, also had a strong quarter (+21.5%). Macy’s, Inc. (NYSE:M) delivered strong second-quarter earnings, beating on earnings and revenue and raising guidance as the retailer continues to pay down debt and grow its digital business.”
8. iShares Russell 2000 Value ETF (NYSE:IWN)
iShares Russell 2000 Value ETF (NYSE:IWN) is an exchange traded fund that invests at least 80% of net assets in securities on the Russell 2000 Value Index. The fund aims to replicate the returns of the cheaper part of the index. Unlike most other ETFs, the fund does not use turnover buffers at the lower market-cap threshold.
A key holding of the iShares Russell 2000 Value ETF (NYSE:IWN) is Ovintiv Inc. (NYSE:OVV), an oil and gas firm. At the end of the fourth quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Ovintiv Inc. (NYSE:OVV), the same as in the previous quarter worth $684 million.
In its Q4 2021 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Ovintiv Inc. (NYSE:OVV) was one of them. Here is what the fund said:
“The outlook for high multiple favorites depends to a great degree on interest rates. Warren Buffett likened interest rates to the force of gravity for asset prices. At current low levels, high valuations on long-duration assets can be justified. If interest rates move up, the adjustment will be painful. Market action early in the new year, with the swift moves up in interest rates and down in the Nasdaq, offers a taste of the medicine.
We underwrite all our names to have sufficient upside even if risk-free rates move up to 3% (a scenario, not a forecast!). As we evaluate the opportunity set, we find more attractive prospects in the classic value names. We often hear that people think value investing is dead, which only strengthens our conviction. Our gross exposure to classic value has risen from 44% a year ago to 62% currently.
One new name that illustrates the potential we see is Ovintiv Inc. (NYSE:OVV), an oil and gas producer. We’ve seen a huge shift in the industry away from growth towards returns on capital, cash generation, and capacity discipline. Ovintiv Inc. (NYSE:OVV) exemplifies the change.
OVV’s new CEO Brendan McCracken says: “We are at the forefront of driving innovation to produce oil and gas from shale both profitably and sustainably. We will generate superior returns and free cash flow by continuously improving capital efficiency and expanding margins while driving down emissions. We will deliver that value to our shareholders through disciplined capital allocation.”
Based on crude at $65 (well below the current $83.82 as of 1/14/22), Ovintiv Inc. (NYSE:OVV) guides to free cash flow generation of $11B over the next 5 years and $21B in the next 10 years. The company’s market cap is currently $10B and its enterprise value is $16B. It’s returning a significant portion of the capital to shareholders. If crude averages $70 in 2022, the company will return $700M to shareholders (in addition to paying down a significant amount of debt), which implies a yield of 7% at the current $39.53 price. In other words, there’s a good shot the company will return nearly its entire market cap to shareholders over the next 5 years.”
7. Avantis U.S. Small Cap Value ETF (NYSE:AVUV)
Avantis U.S. Small Cap Value ETF (NYSE:AVUV) is an exchange traded fund that invests in small-cap value stocks across market sectors and industry groups. The fund can also invest in derivative instruments such as futures contracts, currency forwards, and swap agreements.
Avantis U.S. Small Cap Value ETF (NYSE:AVUV) holds a large stake in Alcoa Corporation (NYSE:AA), a company that makes and sells aluminum products. At the end of the fourth quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Alcoa Corporation (NYSE:AA), compared to 44 in the preceding quarter worth $1.7 billion.
6. Invesco S&P 500 Pure Value ETF (NYSE:RPV)
Invesco S&P 500 Pure Value ETF (NYSE:RPV) is an exchange traded fund that tracks the performance of the S&P 500 Index and invests at least 90% of net assets in securities that exhibit strong value characteristics in the underlying index.
Invesco S&P 500 Pure Value ETF (NYSE:RPV) holds a large stake in Ford Motor Company (NYSE:F), a Michigan-based carmaker. At the end of the fourth quarter of 2021, 53 hedge funds in the database of Insider Monkey held stakes worth $1.7 billion in Ford Motor Company (NYSE:F), compared to 51 in the preceding quarter worth $1.6 billion.
Along with Exxon Mobil Corporation (NYSE:XOM), Microsoft Corporation (NASDAQ:MSFT), and Johnson & Johnson (NYSE:JNJ), Ford Motor Company (NYSE:F) is one of the stocks that hedge funds are buying as interest rates rise.
5. Vanguard Russell 1000 Value Index Fund (NASDAQ:VONV)
Vanguard Russell 1000 Value Index Fund (NASDAQ:VONV) is an exchange traded fund that follows the returns of the Russell 1000 Value Index. The index measures the performance of the largest value stocks that trade on exchanges in the United States.
A premier holding of the Vanguard Russell 1000 Value Index Fund (NASDAQ:VONV) is Johnson & Johnson (NYSE:JNJ), a firm that markets healthcare products. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Johnson & Johnson (NYSE:JNJ), compared to 88 in the previous quarter worth $6.8 billion.
4. iShares MSCI USA Value Factor ETF (BATS:VLUE)
iShares MSCI USA Value Factor ETF (BATS:VLUE) is an exchange traded fund that invests at least 90% of net assets securities on the MSCI USA Index. The index comprises mid and large cap securities in the US. The fund can also invest in futures, options and swap contracts, cash and cash equivalents.
iShares MSCI USA Value Factor ETF (BATS:VLUE) has invested heavily in AT&T Inc. (NYSE:T), a technology and communications firm. At the end of the fourth quarter of 2021, 70 hedge funds in the database of Insider Monkey held stakes worth $4.9 billion in AT&T Inc. (NYSE:T), compared to 66 in the preceding quarter worth $3.2 billion.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and AT&T Inc. (NYSE:T) was one of them. Here is what the fund said:
“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon and AT&T Inc. (NYSE:T) to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”
3. JPMorgan U.S. Value Factor ETF (NYSE:JVAL)
JPMorgan U.S. Value Factor ETF (NYSE:JVAL) is an exchange traded fund that invests at least 90% of net assets in an index that tracks the performance of companies based on metrics such as attractive valuations, book yield, earnings yield, dividend yield, and cash flow yield.
One of the biggest holdings of the JPMorgan U.S. Value Factor ETF (NYSE:JVAL) is Microsoft Corporation (NASDAQ:MSFT), a diversified technology firm. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT) with 26.8 million shares worth more than $9 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT) was a material contributor during the quarter. It is one of the highest quality companies in the world. We believe it has tremendous competitive advantages in its consumer and commercial Microsoft Office products as well as in its server and tools and Azure divisions. Over the last several years, Microsoft Corporation (NASDAQ:MSFT) has been implementing a successful transition from a traditional software license and maintenance revenue model to a subscription revenue model. The company remains competitively entrenched, produces strong free cash flow, and has a strong balance sheet.”
2. iShares Core S&P U.S. Value ETF (NASDAQ:IUSV)
iShares Core S&P U.S. Value ETF (NASDAQ:IUSV) is an exchange traded fund that invests at least 80% of total assets in securities on the S&P 900 Value Index. The index comprises large and mid-cap firms trading on exchanges in the US that exhibit value characteristics.
A flagship holding of the iShares Core S&P U.S. Value ETF (NASDAQ:IUSV) is Exxon Mobil Corporation (NYSE:XOM), an integrated oil and gas firm. At the end of the fourth quarter of 2021, 71 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in Exxon Mobil Corporation (NYSE:XOM), compared to 64 in the previous quarter worth $4.6 billion.
In its Q4 2021 investor letter, Saturna Capital highlighted a few stocks and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here is what the fund said:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon Mobil Corporation (NYSE:XOM), which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
1. SPDR Portfolio S&P 500 Value ETF (NYSE:SPYV)
SPDR Portfolio S&P 500 Value ETF (NYSE:SPYV) is a non-diversified exchange traded fund that tracks the investment returns of the S&P 500 Value Index. The index that comprises large cap value companies in the US.
One of the top holdings of SPDR Portfolio S&P 500 Value ETF (NYSE:SPYV) is Verizon Communications Inc. (NYSE:VZ), a communications and technology firm. At the end of the fourth quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $10.8 billion in Verizon Communications Inc. (NYSE:VZ), compared to 57 in the previous quarter worth $10.3 billion.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE:VZ) was one of them. Here is what the fund said:
“After several quarters of pandemic-induced outsized growth, new broadband connection growth has slowed for U.S. cable operators. This slower growth has coincided with a renewed push by competitors like Verizon Communications Inc. (NYSE:VZ) and AT&T to offer high-speed data (either via wireless connects or by building new fiber-optic networks).”
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Disclosure. None. 10 Best Value ETFs to Invest in Now is originally published on Insider Monkey.
