It may as well be an annual tradition for value investing to turn heads. But with stocks reaching record highs, investors may be looking askance at a very expensive S&P 500. Indeed, the key index recently tallied another record as part of its steady ascent. Whether that climb has brought it too high and opened it up to a serious drop poses a conundrum for investors. An active ETF spin on value investing can provide a strong solution.
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Where growthier strategies have led investors consistently to megacap exposure that poses concentration risk, value investing can find potential gems. While index-based value investing points to somewhat more defensive or less obviously exciting segments, an active approach can provide an even deeper level of scrutiny.
Active Value Investing Solutions
The T. Rowe Price Value ETF (TVAL) presents an option to do just that. The strategy charges a competitive 33 basis point fee for its approach, investing in large-cap firms that meet its value standards. Leaning on T. Rowe Price’s fundamental research capabilities, the strategy takes a bottom-up approach to portfolio construction.
Its managers built their portfolio step by step, finding undervalued names. Specifically, its managers consider value firms to be those meeting some key metrics like dividend yield, undervalued assets, and restructuring opportunities.
That approach has helped the value investing ETF return 9% YTD, according to ETF Database data. That performance has seen the fund outperform both its ETF Database Category and FactSet Segment averages, at 4.7% and 8.1%, respectively. It has done so by investing in names like the Hartford Insurance Group (HIG). Financials may not always be the hot place to be, but HIG has returned 22% YTD, with solid P/E ratios and a 19.4% return on equity, per YCharts data.
An adaptable, active value investing approach could provide a nice counterweight to the Magnificent Seven heavy portfolios. For those looking to make that kind of move while the growth-focused market seems lofty, TVAL merits consideration.
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