EFV: Value ETF Heavy In Banks And Japan

seekingalpha06-05

iShares MSCI EAFE Value ETF holds about 500 stocks with value characteristics listed in developed markets.The EFV ETF is well-diversified across holdings, but quite heavy in Japan and overweight in ...

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Matteo Colombo/DigitalVision via Getty Images This article series aims at evaluating ETFs (exchange-traded funds) regarding past performance and portfolio metrics. Reviews with updated data are posted when necessary. EFV strategy iShares MSCI EAFE Value ETF (BATS:EFV) started investing operations on 8/1/2005 and tracks the MSCI EAFE Value Index. It has 474 holdings, a 30-day SEC yield of 3.41% and an expense ratio of 0.34%. Distributions are paid semi-annually. As described in the prospectus by iShares, The Underlying Index targets approximately 50% coverage of the free float-adjusted market capitalization of the MSCI EAFE Index and consists of those securities classified by MSCI as most representing the value style of investing. Securities classified in this style generally tend to have higher value characteristics (i.e., higher book value to price, 12-month forward earnings to price and dividend yield).(…) Each security (in the MSCI EAFE Index) is evaluated based on certain value factors and growth factors, which are then used to calculate a value score and growth score. Based upon these two scores, MSCI determines the extent to which each security is assigned to the value or growth style. The process of creating overlapping value and growth sets in a parent index looks like the definition of value indexes by S&P Dow Jones Indices. However, some metrics are different. The portfolio turnover rate in the most recent fiscal year was 22%. This article will use as a benchmark the parent index, represented by iShares MSCI EAFE ETF (EFA). The EFV portfolio Europe is the heaviest region, and Japan, the U.K. and France are the heaviest countries. Compared to its parent index, EFV slightly overweight the U.K., Germany, Italy, Spain, Finland and Norway. It underweights mostly the Netherlands, Sweden and Denmark. Hong Kong weighs 1.84% of assets, so direct exposure to geopolitical and regulatory risks related to China is low.   Geographical allocation in % of asset value (chart: author: data: iShares) EFV is very heavy in financials, with 29.5% of assets in this sector (almost 20% is in banks). Industrials weigh 12.7% and other sectors are below 9%. Compared to EFA, EFV overweights financials, energy, utilities, communication and real estate. It underweights industrials, healthcare, consumer discretionary and technology.   Sector breakdown in % of asset value (chart: author: data: iShares) The top 10 holdings, listed in the next table, represent 18% of assets. The heaviest one weighs 2.66%, so risks related to individual companies are low.   Name Sector Weight% Exchange Ticker   SHELL PLC Energy 2.66 London Stock Exchange SHEL   NOVARTIS AG Healthcare 2.38 SIX Swiss Exchange NOVN   ROCHE HOLDING PAR AG Healthcare 2.12 SIX Swiss Exchange ROG   HSBC HOLDINGS PLC Financials 1.95 London Stock Exchange HSBA   TOTALENERGIES Energy 1.8 Nyse Euronext - Paris TTE   BHP GROUP LTD Materials 1.77 Asx - All Markets BHP   MITSUBISHI UFJ FINANCIAL GROUP Financials 1.41 Tokyo Stock Exchange 8306   ALLIANZ Financials 1.35 Xetra ALV   SANOFI SA Health Care 1.3 Nyse Euronext - Paris SAN   BP PLC Energy 1.21 London Stock Exchange BP.   Click to enlarge Fundamentals In accordance with the strategy description, EFV is significantly cheaper than its parent index based on aggregate valuation ratios, reported below. However, growth rates are only slightly lower.     EFV EFA   Price/Earnings TTM 11.52 15.71   Price/Book 1.21 1.84   Price/Sales 0.99 1.47   Price/Cash Flow 6.41 10.03   Earnings growth % 21.32% 21.39%   Sales growth % 7.79% 8.41%   Cash flow growth % 3.67% 4.88%   Click to enlarge Source: Fidelity. Performance Since inception, EFV has lagged its parent index by 1% in annualized return. It also shows a moderately higher risk measured in maximum drawdown and standard deviation of monthly return (volatility).     Tot.Return Annual.Return Drawdown Sharpe ratio Volatility   EFV 112.78% 4.09% -64.40% 0.22 18.70%   EFA 154.89% 5.10% -61.04% 0.28 17.52%   Click to enlarge However, EFV has outperformed EFA by 4.5% over the last 12 months:   EFV vs EFA, 12-month return (Seeking Alpha) With a yield above 3%, EFV may be considered a dividend fund in addition to a value fund. Between 2013 and 2023, the annual sum of distributions went up by 24.7%, from $1.82 to $2.27 per share. This 10-year growth rate is inferior to the cumulative inflation in the same time: about 32%, based on CPI. Moreover, distributions have had ups and downs, as plotted on the chart below.   Distribution history (Seeking Alpha) Competitors The next table compares characteristics of EFV and three other ex-U.S. developed markets ETFs focused on value and large companies:  Dimensional International Value ETF (DFIV) Avantis International Large Cap Value ETF (AVIV) Alpha Architect International Quantitative Value ETF (IVAL).      EFV AVIV DFIV IVAL   Listing date 8/1/2005 9/29/2021 9/13/2021 12/16/2014   Expense Ratio 0.34% 0.25% 0.27% 0.39%   AUM $17.56B $381.06M $7.58B $154.78M   Avg Daily Volume $135.25M $2.06M $27.27M $430.79K   Holdings 474 527 520 57   Top 10 17.95% 17.22% 16.18% 21.72%   Turnover 22.00% 21.00% 12.00% 74.00%   Div. Yield TTM 4.03% 3.39% 3.42% 5.42%   Click to enlarge EFV is by far the largest of these funds (measured in assets under management) and the most liquid (in dollar volume). The next chart plots total returns, starting on 9/30/2021 to match all listing dates. DFIV is the best performer and EFV comes in second position.   EFV vs competitors, since 9/30/2021 (Seeking Alpha) EFV is almost on par with DFIV over the last 12 months:   EFV vs competitors, 12-month return (Seeking Alpha) Takeaway  iShares MSCI EAFE Value ETF holds about 500 stocks with value characteristics listed in developed markets except the U.S. and Canada. EFV is well-diversified across holdings, but quite heavy in Japan and overweight in financials. EFV has lagged its parent index since 2005, but it has outperformed it in the last 12 months. Among value-oriented ETFs investing in a similar stock universe, the actively managed fund DFIV has outperformed EFV since September 2021. The main risk factor of EFV is the weight of the banking industry, close to 20%.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"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":"4.29.3","shortVersion":"4.29.3","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/2441263386"}