MW This value-stock strategy has trounced the S&P 500 for nearly five years
By Philip van Doorn
The Putnam Focused Large Cap Value ETF has been a remarkably consistent performer
These are three of the long-term holdings of the Putnam Focused Large Cap Value ETF.
Value stocks are typically those of mature companies that might be growing slowly but are priced low relative to the companies' earnings power. An investor may expect a value-oriented stock strategy to be less risky and less lucrative over the long term than the S&P 500 or a growth index. But the actively managed Putnam Focused Large Cap Value ETF has outperformed the S&P 500 as well as broad value and growth indexes since it was launched nearly five years ago.
The Putnam Focused Large Cap Value ETF PVAL was established on May 25, 2021. The fund has grown to $8.7 billion in assets under management and has outperformed its benchmark, the Russell 1000 Value Index RLV.
Putnam is a subsidiary of Franklin Templeton.
This is how PVAL has performed since inception against the Russell 1000 Value and Growth indexes, as well as the S&P 500 SPX:
The actively managed Putnam Focused Large Cap Value ETF has outperformed its benchmark, the Russell 1000 Value Index, by a wide margin, while also having a higher total return than the Russell 1000 Growth Index and the S&P 500 since the exchange-traded fund was established on May 25, 2021.
All performance figures in this article include reinvested dividends and are net of fund expenses. A comparison of PVAL's performance with ETFs tracking the indexes is below, along with its best-performing peers, as listed by LSEG.
The Russell 1000 index RUI is made up of the largest 1,000 stocks by market capitalization in the Russell 3000 Index RUA, which itself is designed to capture 98% of the market for common stocks listed in the U.S. The Russell 1000 Value Index has 866 stocks drawn from the full Russell 1000 that have relatively low price/book ratios, as well as lower two-year earnings growth projections and lower growth rates for revenue per share over the previous five years when the index is reconstituted annually.
The Russell indexes are weighted by companies' market valuations, subject to caps applied by FTSE Russell, a unit of LSEG. No stock can make up more than 22.5% of a Russell index, and stocks with weightings of 4.5% or higher cannot make up more than a combined 45% of a Russell index.
PVAL is "benchmark-centric," according to Caroline Edwards, a Senior Client Portfolio Manager focusing on Putnam's Large Cap Value Equity strategies. This means the fund's managers keep the fund's allocation to market sectors close to those of the index. The fund's outperformance relative to the index has resulted from its selection of about 45 stocks in the Russell 1000 Value Index, as well as its portfolio-construction strategy, she said.
Edwards told MarketWatch that the tracking error for RLV relative to the index was typically 3% to 4%, and that "you should expect an annualized excess return in a similar percentage." The fund has more than met that goal.
She said that, over the past several years, much of the fund's excess returns relative to those of the index have come from stocks in the financial, consumer-discretionary, consumer-staples and utilities sectors.
Edwards said Putnam's value team typically expected to hold selected stocks for about five years. Stocks that have been in the portfolio for the fund's entire life have included Citigroup $(CUL3)$, which has been held in various Putnam value portfolios for 10 years, she said. Other long-term holdings have included Walmart $(WMT)$, which she said was "a name we started to trim," and Northrop Grumman $(NOC)$.
Getting back to the idea of not straying too far from the benchmark index, Edwards pointed out that Alphabet $(GOOGL)$ was added to the Russell 1000 Value Index last June, when the index underwent its annual reconstitution. Other names she described as "nontraditional value stocks" added to the index at that time included Amazon.com (AMZN) and Meta Platforms (META).
"In June, since we did not have an opinion on Alphabet, we went neutral to the benchmark," she said. So with Alphabet showing a large gain since last June, the stock made up 3.4% of the PVAL portfolio as of Feb. 28. When asked if the fund would be likely to sell its Alphabet shares if the stock were removed from the Russell 1000 Value Index during its upcoming reconstitution in June, she said yes, but cautioned "that is three months away and it depends on our fundamental view at the time."
Top holdings of PVAL
These were the largest 10 holdings (out of 46) as of Feb. 28:
Company % of PVAL portfolio Forward P/E Dividend yield Cisco Systems 4.0% 18.4 2.08% Citigroup 4.0% 10.5 2.11% Exxon Mobil 4.0% 20.8 2.49% Alphabet 3.4% 24.3 0.29% McKesson 3.4% 20.0 0.37% Southwest Airlines 3.1% 9.8 1.81% Freeport-McMoRan 3.0% 15.8 1.06% Coca-Cola Co. 3.0% 22.7 2.84% Philip Morris International 2.9% 19.0 3.59% Hilton Worldwide Holdings 2.8% 31.9 0.20% Sources: LSEG, Franklin Templeton
The table includes two more data points that could be of interest to value-oriented investors - forward price/earnings ratios and dividend yields. The P/E ratios are Tuesday's closing prices divided by consensus 12-month earnings-per-share estimates among analysts polled by LSEG.
The PVAL portfolio has a weighted forward P/E of 15.6, as calculated by LSEG. This compares with forward P/E of 16.5 for the iShares Russell 1000 Value ETF IWD, which tracks the benchmark by holding all of its stocks, and 19.9 for the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500.
Fund performance compared with peers
The Putnam Focused Large Cap Value ETF has a net expense ratio of 0.55%, which means annual fees totaling $55 for a $10,000 investment. The fund's full expense ratio is 0.56%, with 0.01% waived until the end of 2026.
LSEG lists 17 peer funds benchmarked to the Russell 1000 Value Index that were established for at least three years through February.
Here are three-year average annual total returns through February for PVAL, the iShares Russell 1000 Value ETF and the State Street SPDR S&P 500 ETF Trust. Those are followed by the five peer ETFs on LSEG's list showing the highest average annual returns:
Exchange-traded fund Three-year avg. annual return through Feb. 2026 Net expense ratio Assets under management ($mil) Launch date Putnam Focused Large Cap Value ETF 21.8% 0.55% $8,791 5/25/2021 iShares Russell 1000 Value ETF 15.8% 0.18% $71,033 5/22/2000 State Street SPDR S&P 500 ETF Trust 21.6% 0.09% $698,270 1/22/1993 PGIM Jennison Focused Value ETF 22.8% 0.75% $46 12/12/2022 Matrix Advisors Value ETF 21.6% 0.75% $86 9/16/1983 WisdomTree U.S. Value Fund 19.6% 0.12% $2,557 2/23/2007 Avantis U.S. Large Cap Value ETF 19.2% 0.15% $10,633 9/21/2021 Touchstone U.S. Large Cap Focused ETF 18.9% 0.56% $55 7/27/2022 Source: LSEG
For all funds, the net expense ratios match the full expense ratios, except for PVAL's small expense waiver mentioned above, and for the Touchstone U.S. Large Cap Focused ETF LCF, which has a gross expense ratio of 1.29%. LCF's expenses are being limited to 0.56% of assets until at least the end of April.
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March 25, 2026 10:15 ET (14:15 GMT)
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