New SPDRs Debut: Positive Momentum And Low Valuation (SCHB, VLU, MMTM)

Share This Article
November 1, 2012 11:21pm NYSE:MMTM NYSE:SCHB

Michael Johnston: State Street became the latest ETF firm to launch factor-based equity ETFs this week, rolling out a pair of funds that will segment the universe of large, mid,


and small U.S. cap stocks based on valuation and momentum factors. The two new ETFs will segment the S&P 1500 Index, a broad-based benchmark that includes substantially all of the publicly-traded U.S. market capitalization. The new factor ETFs are highlighted below [for updates on all new ETFs, sign up for the free ETFdb newsletter]:

  • SPDR S&P 1500 Value Tilt ETF (NYSEARCA:VLU): This ETF will apply an alternative weighting methodology to the S&P 1500 Index, seeking to give the largest weightings to stocks that exhibit cheap valuations. In determining valuation, the index will consider price-to-earnings, price-to-cash flow, price-to-sales, price-to-book value, and price-to-dividends. Components deemed to have the “cheapest” valuation will be overweighted relative to stocks with loftier valuations.
  • SPDR S&P 1500 Momentum Tilt ETF (NYSEARCA:MMTM): This ETF will use an alternative weighting methodology to shift assets towards stocks exhibiting positive momentum factors, as measured by performance over the 11 months ending one month prior to the rebalancing date.

Under The Hoods

MMTM Index
Dividend Yield 2.04%
Forward P/E 15x
Price-to-Book 2.6x

As of September 30, the top holdings in MMTM included Apple (AAPL, 8.4%), Exxon Mobil (XOM, 2.8%), and AT&T (T, 2.3%). Several other blue chips also made the top ten, including GE, Pfizer, and Microsoft. The fund gives its largest sector weighting to technology, which is not surprising given the red hot performance from tech stocks so far in 2012. The lowest weights are to utilities (4%) and materials (3%).

[See the MMTM fact sheet]

VLU Index
Dividend Yield 2.14%
Forward P/E 13x
Price-to-Book 1.7x

As of September 30, the top holdings in VLU exhibited a bit of overlap with MMTM; Exxon (3.3%), AT&T (2.3%), and Apple (2.3%) were the top holdings. While that may seem strange, it’s a result of the methodology employed; the overlap between these two products will be almost perfect in terms of the individual stocks held, with the difference coming in the weightings assigned to each. For example, AAPL receives a much smaller weighting in VLU than it does in MMTM.

[see the VLU fact sheet]

Factor ETF Investing In Focus

There are now several ETFs that offer exposure to so-called “factor investing” styles — approaches that involve segmenting a broad, cap-weighted index based on certain fundamental factors. Many of these ETFs have become quite popular; low volatility ETFs in particular have caught on with investors looking to scale back risk while still keeping a fair amount of skin in the game.

VLU and MMTM will be somewhat unique in that it will simply tilt exposure towards certain stocks and away from others, as opposed to picking and choosing which components make the cut. Other forms of factor investing include:

Both new ETFs will charge an annual expense ratio of, putting them below the average for the All Cap Equities ETFdb Category. The cheapest ETF in that category, Schwab’s U.S. Broad Market ETF  (NYSEARCA:SCHB), charges just 0.04%.

Written By Michael Johnston From ETF Database  

ETF Database is committed to giving our audience, consisting of both active traders and buy-and-hold investors, information that, to our knowledge, is truthful and non-biased. [For more ETF insights, sign up for our free ETF newsletter or try a free seven day trial of ETFdb ProETFdb Pro Members Only.]


9 "Must Own" Growth Stocks For 2019

Read Next



Get Free Updates

Join over 50,000 investors who get the latest news from ETFDailyNews.com!

Most Popular



Explore More from ETFDailyNews.com

Free Daily Newsletter

Get daily ETF insights from our market experts. Never miss another important market development again!

ETFDailyNews.com respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories