The 3 Best Large-Cap Value ETFs [Guggenheim Invest S&P 500 Pure Value ETF, Vanguard Value ETF]

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May 6, 2015 4:45pm NYSE:FTA NYSE:RPV

etfsLawrence Meyers: I’m more comfortable with value investing than I am with growth stocks.


I think I got burned once too often with growth stocks around the time the dot-com bubble burst.

So when it comes to finding value stocks, I feel a bit more at home.

large-cap-value-etf

Yes, growth stocks have their place, as I wrote a couple of weeks ago. But I think holding large-cap value ETFs of some kind in a long-term diversified portfolio is very important.

Which large-cap value ETFs are right for you? It depends on what kind of investor you are. So, here are three possible choices – one each for the aggressive investor, conservative investor and general investor.

For conservative investors, have a look at Vanguard Value ETF (NYSEArca: VTV). One of the cheapest ETFs in the category, it carries an expense ratio of 0.09%. It’s up 2.33% year-to-date.

With 323 holdings and a median market cap of $81 billion, you are really getting the cream of the large-cap value crop here. The top 10 holdings only account for 25.4% of the total asset base, and they are safe and reliable investments.

The sector diversity of the Vanguard Value ETF is impressive. It has 22% of assets invested in financials, 18% in consumer goods and services, 15% in health care, 11% in industrials, 10% in technology and 10% in energy. The rest is divided between basic materials, telecom and utilities.

Here we find the kind of famous names you’d expect:  Exxon Mobil (NYSE: XOM), Microsoft (NASDAQ: MSFT), Johnson & Johnson (NYSE: JNJ), Verizon (NYSE: VZ), Wells Fargo (NYSE: WFC).

It’s a very, very low turnover fund, with only 5.5% of stocks turned over in the past year. Its average price-earnings ratio is 17.4.

For aggressive investors, check out the First Trust Large Cap Value AlphaDEX ETF (NYSEArca: FTA). It has 197 holdings, so it isn’t highly concentrated and therefore too risky, but it isn’t too spread out, either. The top 10 stocks only make up 10% of the asset base, so you don’t have too much concentration risk at this level, either. It’s up 2.91% so far this year.

The expense ratio is a bit high at 0.64%, but that’s not outrageous. Since inception, it has an average annual return of 6.68% versus the S&P 500’s 6.36%.

The top holdings are in energy, as that sector has been struggling for the past several months. Holdings include: Valero Energy (NYSE: VLO), Marathon Petroleum (NYSE: MPC), Newfield Exploration (NYSE: NFX), First Solar (NASDAQ: FSLR) and Kohl’s (NYSE: KSS).

A good large-cap value ETF choice for the general investor is the Guggenheim S&P 500 Pure Value ETF (NYSEArca: RPV). At 199 holdings, it’s a bit too concentrated for my liking, but not unreasonably so. Its top 10 stocks account for 18% of the asset base. Its expense ratio is 0.35%.

The Guggenheim ETF is actually down 1.15% year-to-date, but I don’t expect that to continue. Because the sector breakdown includes 25% energy, I think when energy turns around (and it will), the fund will outperform. At a 33% allocation it’s a bit heavy in financials, but otherwise it’s comprised of 4% health care, 4% technology, 5% industrial and 16% consumer holdings.

It has some of the same names we’ve seen before – like Valero, Marathon and Newfield – but it also holds Berkshire Hathaway (NYSE: BRK-B) and Staples (NASDAQ: SPLS).

This article is brought to you courtesy of Lawrence Meyers from Wyatt Investment Research.


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