|
You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. |
SCROLL TO SITE
Value exchange-traded funds (ETFs) simplify what can be a tricky, time- and research-intensive process of buying stocks that are underpriced by markets. When you invest in a large-cap value ETF, you’re getting exposure to the biggest public companies in the market that are undervalued based on metrics such as the price-to-earnings ratio (P/E ratio) and price-to-book (P/B).
Forbes Advisor analyzed dozens of funds to arrive at some of the best large-cap value ETFs, accounting for average P/E, P/B and market capitalization of each ETF.
14.09%
n/a
0.15%
14.09%
n/a
0.15%
The iShares MSCI USA Value Factor ETF tracks the MSCI USA Enhanced Value Index, which measures value based on P/B, forward P/E and enterprise value to cash flow from operations. This ETF has the lowest average P/E ratio of the funds on our list at less than 13.
It has more than $15 billion in total assets and charges a low expense ratio of 0.15%. VLUE is a focused ETF, holding just 147 issuers as of April 28, 2021. Its trailing 12-month (TTM) yield was 1.83% as of March 31, 2021.
11.78%
11.48%
0.08%
11.78%
11.48%
0.08%
The Vanguard Russell 1000 Value Index Fund ETF tracks the Russell 1000 Value Index, which includes companies with lower P/B ratios and lower expected growth values. The ETF has $6 billion in net assets and charges an expense ratio of just 8 basis points. Its TTM yield was 1.88%.
15.28%
14.02%
0.39%
15.28%
14.02%
0.39%
The Invesco S&P 500 Revenue ETF tracks the S&P 500 Revenue-Weighted Index, which weights the companies in the S&P 500 index by revenue rather than market capitalization. The result is a fund with an average P/E about 5 points lower than a market-weighted S&P 500 index fund. The ETF has $1 billion in total assets, a TTM yield of 1.55% and an expense ratio of 0.39%.
15.01%
n/a
0.25%
15.01%
n/a
0.25%
The Schwab Fundamental U.S. Large Company Index ETF tracks the Russell RAFI U.S. Large Company Index. This ETF is unique in that it includes growth companies such as Apple (AAPL) and Microsoft (MSFT). Yet it maintains an overall value tilt based on the index methodology that factors in adjusted sales, retained operating cash flow and dividends plus buybacks, among others. It has an expense ratio of 0.25%, $6.7 billion in total assets and a TTM yield of 1.96%
14.93%
13.31%
0.39%
14.93%
13.31%
0.39%
The Invesco FTSE RAFI US 1000 ETF tracks the FTSE RAFI US 1000 Index, which is weighted based on a number of fundamental factors, such as total cash dividends, free cash flow, total sales and book equity value. Market values are not considered in the index weights. It charges one of the highest expense ratios on our list, yet still a relatively low 0.39%. It has $5.1 billion in total assets and a TTM yield of 1.69%
13.03%
12.27%
0.04%
13.03%
12.27%
0.04%
The Vanguard Value Index Fund ETF tracks the CRSP U.S. Large Cap Value Index, which classifies value companies based on P/B, forward P/E, historic P/E, dividend-to-price ratio and sales-to-price ratio. The result is an ETF tilted more toward value than many of the other funds in our list. Vanguard charges just 4 basis points. The ETF has more than $77 billion in total assets and TTM yield of 2.44%.
n/a
n/a
0.35%
n/a
n/a
0.35%
The Nuveen ESG Large-Cap Value ETF is the only fund on our list that focuses on an environmental, societal and governance (ESG) investment style, including lower carbon exposure. It tracks the TIAA ESG USA Large-Cap Value Index, which in turn is derived from the MSCI USA Value Index. Value is defined based on B/P, forward P/E and dividend yield. The fund has just under $1 billion in total assets, charges an expense ratio of 0.35% and has a TTM yield of 1.29%
Our methodology in selecting the above funds considered a number of factors. Beyond focusing on ETFs classified as large-cap value, we considered the index tracked by each fund. The value indexes vary in value methodology, number of issuers and market capitalization, among other factors. We avoided including multiple funds that tracked the same index as the difference between such funds is minimal.
With one exception, we excluded funds that didn’t have at least five years of performance data. We made an exception with Nuveen ESG Large-Cap Value ETF because we believe its focus on ESG companies combined with its three-year performance of 11.74% justified its inclusion in our list. We also considered each fund’s expense ratio and dividend yield, although the yield was not a primary factor.
All five-year and 10-year return percentages are monthly performance metrics good as of the date of publication of this listing.
Everybody knows that big-ticket items like televisions and laptops always go on sale, eventually. Savvy shoppers save their money and wait for the sales, rather than paying full price right now. And that’s not a bad way to understand value investing: Buying stocks on sale, only when they’re priced at a discount, then waiting for them to rise over time to match their true value.
Our analogy only goes so far, of course. Sales come pretty often, and it’s not hard to discern both the full price for the TV you have your eye on or what sort of discount makes for a great deal. Value investing is much more challenging, and it requires plenty of research and detective work to uncover which stocks are value buys and what their “true” price should be—their so-called intrinsic value.
Value investors believe the stock market overreacts to the news and events that impact individual companies. They feel that short-term developments drive moves in stock prices that don’t always reflect a company’s long-term fundamentals. Going deep to research those fundamentals—things like P/E, P/B and book value—helps value investors understand the intrinsic value of a company and see whether the current market price is in line with that value or trading at a steep discount.
For value investing, the bigger the difference there is between a stock’s intrinsic value and its current market price, the greater the opportunity. But even then, not every value stock will see its market price rebound to match what an investor believes is its intrinsic value, making value investing a tricky proposition that’s far from a sure bet in every case.
Large-cap value ETFs track an underlying index that aims to mirror the performance of a group of undervalued, large-cap stocks. While these ETFs share common characteristics, there can be significant differences between the indexes they track. For example, each index defines differently how it measures value. While the metrics vary from one index to another, most include factors such as P/E and P/B.
The ETFs on this list show a wide variance when it comes to these measures of value. For example, the average P/E of the funds in our list range from under 13 to more than 18. These differences should be considered as one evaluates which funds may be appropriate for a portfolio—remember, lower P/E ratios may indicate better value for investors.
Each index can also vary based on the average market capitalization of its component companies. The funds on our list vary from an average market cap of about $62 billion to a high of more than $100 billion.
Rob is a Contributing Editor for Forbes Advisor, host of the Financial Freedom Show, and the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom. He graduated from law school in 1992 and has written about personal finance and investing since 2007.
Ben is the Retirement and Investing Editor for Forbes Advisor. With two decades of business and finance journalism experience, Ben has covered breaking market news, written on equity markets for Investopedia, and edited personal finance content for Bankrate and LendingTree.