IVW: Growth ETF Lagging Its Peers

seekingalpha04-10

iShares S&P 500 Growth ETF selects and weights S&P 500 stocks based on value and growth metrics.The IVW ETF is very concentrated in information technology and in its top holdings.Not only growth rates...

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Taawai
05-06
Taawai
Awesome article, very insightful thank you.

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href=https://seekingalpha.com/article/4682968-ivw-growth-etf-lagging-its-peers><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>iShares S&P 500 Growth ETF selects and weights S&P 500 stocks based on value and growth metrics.The IVW ETF is very concentrated in information technology and in its top holdings.Not only growth rates...</p>\n\n<a href=\"https://seekingalpha.com/article/4682968-ivw-growth-etf-lagging-its-peers\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0175139822.USD","symbol_name":"AB FCP I Global Equity Blend A 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Pgiam/iStock via Getty Images IVW strategy iShares S&P 500 Growth ETF (NYSEARCA:IVW) started investing operations on 05/22/2000 and tracks the S&P 500 Growth Index. It has 228 holdings, an expense ratio of 0.18% and a 12-month trailing yield of 0.93%. Distributions are paid quarterly. It is a direct competitor to SPDR Portfolio S&P 500 Growth ETF (SPYG) and Vanguard S&P 500 Growth ETF (VOOG), which track the same index.     IVW SPYG VOOG   Inception 5/22/2000 9/25/2000 9/7/2010   Expense Ratio 0.18% 0.04% 0.10%   AUM $44.25B $24.84B $10.32B   Avg Daily Volume $325.38M $145.73M $40.81M   10 Year Price Return 242.18% 241.61% 243.39%   Click to enlarge IVW is the largest (in assets) and most liquid (in dollar volume) of these three funds. On the downside, it has the highest fee. Its 10-year return is 1.2% behind VOOG, meaning the latter had a lower tracking error in this time frame. As described by S&P Dow Jones Indices, S&P 500 (SP500) constituents are ranked in Value and Growth styles using three valuation ratios and three growth metrics. The valuation ratios are book value to price, earnings to price and sales to price. The growth metrics are sales growth, earnings growth, and momentum. By construction, 33% of the parent index constituents exclusively belongs to each style, and 34% belongs to both styles. The growth style subset serves as the S&P 500 Growth Index and is rebalanced annually. It is capital-weighted, with an adjustment for constituents belonging to both styles. For example, a company with a Value rank better than its Growth rank is given a larger weight in the Value Index than in the Growth Index. The fund’s turnover rate in the most recent fiscal year was 34%. This article will use as a benchmark the parent index S&P 500, represented by SPDR® S&P 500 ETF Trust (SPY). IVW portfolio The portfolio is overweight in technology (46.9% of asset value). Compared to the parent index, IVW significantly overweights this sector, and to a lesser extent consumer discretionary and communication services. It underweights all other sectors, and almost ignores utilities and real estate.   IVW sector breakdown (Chart: author; data: iShares, SSGA) The portfolio is very concentrated: the top 10 issuers, listed in the next table with growth metrics, represent 59.4% of asset value. The top 5 names weigh more than 7% each. For accuracy, the two share series of Alphabet (GOOGL, GOOG), listed as distinct holdings, have been aggregated below.   Ticker Name Weight% EPS growth %TTM EPS growth %5Y Sales Growth %TTM Sales Growth %5Y   MSFT Microsoft Corp. 13.16 22.94 35.37 11.51 13.98   AAPL Apple, Inc. 10.20 9.20 15.55 -0.47 7.59   NVDA Nvidia Corp. 8.97 585.45 48.41 125.85 39.06   AMZN Amazon.com, Inc. 7.06 1162.74 23.55 11.83 19.80   GOOGL, GOOG Alphabet, Inc. 7.02 27.47 21.56 9.36 17.53   META Meta Platforms, Inc. 4.76 73.52 14.46 15.69 19.29   LLY Eli Lilly & Co. 2.58 -16.40 13.74 19.56 9.69   AVGO Broadcom Inc. 2.45 -8.30 2.37 12.94 11.43   TSLA Tesla, Inc. 2.00 18.64 67.74 18.80 35.15   CRM Salesforce, Inc. 1.22 1938.34 24.06 11.18 21.28   Click to enlarge Fundamentals In accordance with the underlying index description, IVW is more expensive than the benchmark regarding valuation ratios and has better growth rates. As reported in the next table, the gap in cash flow growth is the most impressive, although this factor is not considered by the methodology.     IVW SPY   P/E TTM 33.11 25.56   Price/Book 9.8 4.49   Price/Sales 5.76 2.94   Price/Cash Flow 22.84 17.51   Earnings growth 26.48% 21.52%   Sales growth % 13.11% 8.78%   Cash flow growth % 16.32% 8.79%   Click to enlarge Data source: Fidelity. In my ETF reviews, risky stocks are companies with at least 2 red flags among bad Piotroski score, negative ROA, unsustainable payout ratio, bad or dubious Altman Z-score, excluding financials and real estate where these metrics are unreliable. With this assumption, risky stocks weigh only 4.6% of asset value, which is an excellent point. Moreover, based on my calculation of aggregate quality metrics (reported in the next table), portfolio quality is superior to the large cap benchmark. The return on assets is especially good.     IVW SPY   Atman Z-score 12.95 3.70   Piotroski F-score 6.77 6.17   ROA % TTM 18.90 7.28   Click to enlarge Performance Since 06/01/2000 IVW has underperformed SPY by a very short margin of 14 bps in annualized return. It also shows slightly higher risk metrics (maximum drawdown and volatility).     Total Return Annual Return Drawdown Sharpe ratio Volatility   IVW 436.70% 7.30% -57.39% 0.41 16.11%   SPY 453.34% 7.44% -55.19% 0.44 15.39%   Click to enlarge However, the growth fund has beaten the benchmark over the last 10 years: IVW vs SPY, last 10 years (Seeking Alpha) IVW vs. competitors The next table compares characteristics of IVW and five large-cap growth ETFs implementing various methodologies:  Vanguard Growth ETF (VUG) iShares Russell 1000 Growth ETF (IWF) Schwab U.S. Large-Cap Growth ETF (SCHG) iShares Core S&P U.S. Growth ETF (IUSG) Invesco QQQ Trust ETF (QQQ).      IVW VUG IWF SCHG IUSG QQQ   Inception 5/22/2000 1/26/2004 5/22/2000 12/11/2009 7/24/2000 3/10/1999   Expense Ratio 0.18% 0.04% 0.19% 0.04% 0.04% 0.20%   AUM $44.25B $226.52B $88.52B $26.85B $16.88B $257.45B   Avg Daily Volume $325.38M $339.57M $451.28M $136.06M $62.13M $19.72B   Holdings 228 211 444 250 478 102   Top 10 59.42% 56.26% 53.32% 56.16% 54.97% 47.14%   Turnover 34.00% 5.00% 14.00% 9.00% 36.00% 22.08%   Click to enlarge The fee of IVW is on the expensive side. The next chart compares total returns, starting on 12/14/2009 to match all inception dates. IVW is the second-worst performer, whereas QQQ is ahead of the competition with a comfortable margin. IVW vs competitors, since 12/14/2009 (Seeking Alpha) Over the last 3 years, IVW has also been lagging while SCHG is leading: IVW vs competitors, 3-year return (Seeking Alpha) Takeaway iShares S&P 500 Growth ETF (IVW) selects and weights S&P 500 stocks based on value and growth metrics. It is very concentrated in information technology and in its top holdings. Not only growth rates, but also quality metrics look attractive.  However, iShares S&P 500 Growth ETF has lagged most of its close competitors since 2009. QQQ appears as the best performing growth ETF in this time frame. Compared to peers, IVW is not really appealing as a long-term investment, but it may be used in tactical allocation strategies switching between growth and value.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[{"id":302805516730464,"gmtCreate":1714946548355,"gmtModify":1714960043914,"author":{"id":"4128020936071602","authorId":"4128020936071602","name":"Taawai","avatar":"https://community-static.tradeup.com/news/c27825e45967a358bcf40794f945083f","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Awesome article, very insightful thank you.","listText":"Awesome article, very insightful thank you.","text":"Awesome article, very insightful thank you.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/302805516730464","repostId":2426129537,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":1,"commentSize":0,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2426129537"}