WTV: A Great Way To Define Value

seekingalpha08-11

Value over growth style investing is recommended due to crowded Tech sector trade.WisdomTree U.S. Value Fund focuses on shareholder yield through active management for value investing.The portfolio ...

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PM ImagesI continue to pound the table on value over growth style investing, mainly because I believe Tech (which dominates growth) is the most crowded sector trade in the world right now. I still believe in cycles, and value increasingly looks like it may have bottomed here relative to growth. If you’re of the same mindset, then you may want to consider the WisdomTree U.S. Value Fund (NYSEARCA:WTV). This fund takes a unique spin on defining value through shareholder yield through active management focusing on those stocks which are returning cash to their shareholders via dividends and share buybacks. By blending forward dividend yield, past dividend growth and share repurchases into an overall measure the fund attempts to screen the equity universe for companies that are returning capital to investors while maintaining financial health and profitability. By sorting companies based on shareholder yield, the portfolio naturally avoids companies with over-leveraged balance sheets. The portfolio is reconstituted and rebalanced on an annual basis; however, the investment team might opt for a more active approach based on market conditions and investment opportunities. A Look At The Holdings WTV holds 159 individual positions, with no position making up more than 1.85% of the fund. Big fan of this, given how much concentration risk there is in core portfolios like the S&P 500 at this point in the cycle.   wisdomtree.comWhat do some of these companies do? Vistra Corp is an integrated retail electricity and power generation company in the United States. Exxon Mobil Corporation is the largest publicly traded international oil and gas company in the world. Applovin Corp is a leading global technology company that offers software that mobile application developers and marketers use to build, monetize, and market their apps. And Synchrony Financial is a consumer finance company that provides private-label credit cards, promotional financing, and installment lending to a range of retailers, manufacturers, and other businesses. Together, these top holdings represent exposure to sectors such as utilities, energy, information technology, financials and consumer discretionary, giving investors a well-balanced portfolio that’s still geared for growth and income with high overall shareholder yield Sector Composition and Weightings As is typically the case in value-oriented portfolios, Financials make up the largest allocation, followed by Consumer Discretionary.   wisdomtree.comCandidly, I’m a bit nervous about the Discretionary sector given that many of the stocks there are struggling post 2021 high, with several saddled with high debt against razor-thin margins. The hope here is that the shareholder yield filter means those companies most fundamentally vulnerable wouldn’t be included anyway here. Peer Comparison Since this is a value fund and tilts large-cap, it’s worth comparing WTV to the Russell 1000 Value ETF (IWD), which tracks the Russell 1000 Value Index. That index is passive and an often cited benchmark for defining value stocks. When we look at the price ratio of WTV to IWD, we find that WTV significantly outperformed over the last several years. Shareholder yield, it would appear, is quite powerful.   stockcharts.comPros and Cons On the plus side, the fund’s bias toward shareholder yield, plus its additional high-quality characteristics, gives it the potential to benefit from companies that are returning capital and have other financial and profitability characteristics that indicate the company might be a long-term, quality winner. This potentially can provide not just enhanced returns, but also more income for shareholders over time. The fund’s active management might add flexibility and adaptability to its quantitative, buy-and-hold, information-driven investment process. The downside? Though share repurchases can be a shareholder-friendly activity for a traditional active-equity fund, they can also be poorly managed or ill-timed, resulting in capital being returned at the wrong time or at the wrong valuation. Additionally, some investors view share repurchases as a less permanent form of capital return than dividends, which might hamper the fund’s appeal to income-focused investors. Conclusion  For those who think value is going to make a strong comeback, the WisdomTree US Value Fund represents an interesting way for value investors to get exposure to rising shareholder yields as the determinant of what defines the style. The ETF targets undervalued US companies that score highly on a framework that prioritizes companies with features including shareholder yield, in addition to quality. I actually like this fund very much and think there’s a lot of potential room for it to continue to work in the years ahead. Worth considering.","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":"4.26.4","shortVersion":"4.26.4","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/2458625698"}