VTV: A Large-Cap ETF For Investors Looking For Value

seekingalpha07-11

Sakorn Sukkasemsakorn Value investing has been somewhat out of favor, as evidenced by the leadership of growth stocks over the past years. However, with stocks trading at high multiples after reaching...

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However, with stocks trading at high multiples after reaching...</p>\n\n<a href=\"https://seekingalpha.com/article/4703484-vtv-large-cap-etf-for-investors-looking-for-value\">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":"LU0029864427.USD","symbol_name":"TEMPLETON GLOBAL \"A\" (USD) INC","start_time":0,"source_url":"https://seekingalpha.com/article/4703484-vtv-large-cap-etf-for-investors-looking-for-value","article_id":"2450363793","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1397011551/image_1397011551.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2450363793","pubTimestamp":1720699899,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Sakorn Sukkasemsakorn Value investing has been somewhat out of favor, as evidenced by the leadership of growth stocks over the past years. 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However, with stocks trading at high multiples after reaching record levels, funds with a value-oriented approach become increasingly attractive. In this context, the Vanguard Value ETF (NYSEARCA:VTV) provides overweight exposure to more defensive sectors, such as healthcare, and shows relatively low multiples, with a P/E ratio of nearly 16x. Meanwhile, its focus on larger capitalization companies offers an additional layer of earning stability, underscoring this fund as an interesting alternative for investors looking for diversification toward value strategies. ETF Description & Highlights VTV is an exchange-traded fund that aims to offer exposure to value stocks within large capitalization companies in the U.S. market, tracking the performance of the underlying CRSP US Large Cap Value index. This index is a subset of the parent CRSP US Large Cap index, which targets the largest companies representing 70% of the U.S. market capitalization. The eligible companies constituting the CRSP US Large Cap Index are initially weighted according to their market cap. In turn, the CRSP US Large Cap Value Index applies several value metrics to the same universe of eligible companies to gauge their value characteristics. These metrics include book-to-price ratio, forward and historical earnings-to-price ratios, dividend yield, and sales-to-price ratio. Based on these metrics, a composite value score is then calculated and used to rank companies within the original group. The index methodology also applies a band threshold to reduce the migration of companies' classification from value to growth styles and vice versa, and eligible stocks are primarily weighted by market capitalization. As of May 31, 2024, VTV has allocations in 342 companies, tracking the underlying CRSP US Large Cap Value Index, with an average market cap of $121.3 billion. Of these, 27.1% of total assets are composed of mega caps, and 45.6% of large caps, and no exposure to small caps. In comparison, the parent CRSP US Large Cap Index, represented by the Vanguard Large-Cap ETF (VV), is composed of 513 stocks, with an average market cap of $292.8 billion, and heavier allocation to mega caps, with 46.8% of total assets, and 34.6% in large caps. VTV's top ten holdings [Berkshire Hathaway (BRK.A), Broadcom (AVGO), JPMorgan (JPM), Exxon Mobil (XOM), UnitedHealth (UNH), Procter & Gamble (PG), Johnson & Johnson (JNJ), Home Depot (HD), Merck (MRK), and Walmart (WMT)] represent 22% of total assets, mostly from healthcare, financial, and consumer sectors, as opposed to the parent CRSP US Large Cap Index, where major constituents are big techs, such as Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA), much like the S&P 500.   Morningstar, consolidated by the author The table below compares VTV with other large-cap ETFs by AUM, following a value approach. The first peer group contains six ETFs, where the first one, IWD is based on the Russell 1000 index. The next two, IVE and SCHV have nearly 500 constituents each, while PWV, MGV, and IWX are more concentrated on larger capitalization companies in the group, with less than 200 holdings each.   Morningstar, consolidated by the author From a sector allocation perspective, VTV's largest allocation is to the financial services sector, with 21.4% of total equities, followed by healthcare with 17.2%, industrials 13.2%, technology 11.9%, consumer defensive 10.4%, energy 7.4%, utilities 5.2%, consumer cyclical 4.5%, communication services 3.3%, real estate 2.9% and basic materials 2.5%. Relative to the parent CRSP US Large Cap Index, VTV is mostly overweight in financial services (+8.7%), industrials (+5.3%), and healthcare (+5.2%), while heavily underweight in technology (-20.1%), communication services (-6.0%), and consumer cyclical (-5.2%).   Morningstar, consolidated by the author Compared to the peer group of large caps value ETFs, VTV is slightly overweight in consumer defensive (+1.9%), marginally in utilities and industrials, with a modest underweight allocation in energy, consumer cyclical, financials, and communication services. These numbers show some degree of convergence among value ETFs toward low-multiples sectors like financials or more defensive areas, such as healthcare and consumer defensive, while limiting exposure to high-valuation industries, such as technology and communication services.   Morningstar, consolidated by the author Source: Morningstar, consolidated by the author VTV's multiples are considerably lower than those of the CRSP US Large Cap and the S&P 500 indexes. Its P/E ratio is 16.2x, 26% lower than 21.9x for the parent benchmark. In contrast, VTV's growth metrics, such as earnings and sales growth, are comparatively lower, as expected, given a sizeable chunk of the broader market growth has been concentrated in specific areas, such as technology, particularly in big tech names.   Morningstar, consolidated by the author Looking at the peer group, VTV's multiples are marginally higher than the peer group, influenced primarily by one of the peers, the Invesco Large Cap Value ETF (PWV), whose overweight allocation to energy (16.4%) and financials (26.3%) drove its P/E ratio to as low as 12.4x, as opposed to the peers, that stays just in the neighborhood of 16x. Nevertheless, this does not materially change the value-oriented profile of VTV and all funds in the peer group, as all show, on a relative basis, significantly lower multiples than the benchmarks.   Morningstar, consolidated by the author Solid Returns In Absolute Terms VTV's total return has been unsurprisingly below the large-cap benchmarks, as stock market gains have been concentrated in those well-known big techs. But it is fair to say that value strategies have rewarded investors in the long term, with nearly double-digit returns in the past decade or so. Meanwhile, VTV has been slightly ahead of the peer group of large-cap value ETFs.   Morningstar, consolidated by the author A positive for VTV and the peer group is that volatility measures like standard deviation and maximum drawdown have been consistently lower than the overall market, as we should expect for value stocks in a broader sense. Despite that, while VTV's beta below 1.0 reaffirms this fund as a lower volatility investment vehicle, its Sharpe ratio, a measure of risk-adjusted return, shows lower readings relative to benchmarks, as a bullish and rather complacent market has been favorable to strategies favoring growth instead of value.   Morningstar, consolidated by the author In summary, although VTV's performance has not been substantially better than the peer group, this ETF shows what is expected from a value fund: low multiples, overweight allocations in more defensive sectors, such as healthcare and consumer staples, and behemoths like Berkshire, JPMorgan, Exxon and Procter & Gamble among its top holdings.  Under the current market environment, it is tempting to be overly allocated to growth stocks, but diversification is key in any circumstances. This is particularly important now that valuations are arguably high. That said, funds such as VTV provide an opportunity to remain invested, but with at least a portion of the portfolio more tilted toward value.","kind":null,"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":"4.29.2","shortVersion":"4.29.2","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/2450363793"}