Launched on 04/16/2013, the iShares MSCI USA Value Factor ETF (VLUE) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $17.37 billion, this makes it one of the larger ETFs in the Style Box - Large Cap Value. VLUE is managed by Blackrock (NYSE:BLK). VLUE seeks to match the performance of the MSCI USA Enhanced Value Index before fees and expenses.
The MSCI USA Enhanced Value Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid capitalization stocks.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for VLUE are 0.15%, which makes it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 2.12%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For VLUE, it has heaviest allocation in the Information Technology sector --about 27% of the portfolio --while Healthcare and Consumer Discretionary round out the top three.
Looking at individual holdings, At&t Inc (T) accounts for about 6.44% of total assets, followed by Intel Corporation Corp (NASDAQ:INTC) and General Motors (GM).
The top 10 holdings account for about 33.42% of total assets under management.
Performance and Risk
So far this year, VLUE has added about 3.43%, and was up about 24.92% in the last one year (as of 01/17/2022). During this past 52-week period, the fund has traded between $89.78 and $114.92.
The ETF has a beta of 1.08 and standard deviation of 25.68% for the trailing three-year period, making it a medium risk choice in the space. With about 153 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares MSCI USA Value Factor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $59.53 billion in assets, Vanguard Value ETF has $93.92 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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iShares MSCI USA Value Factor ETF (VLUE): ETF Research Reports
Intel Corporation (INTC): Free Stock Analysis Report
AT&T Inc. (T): Free Stock Analysis Report
General Motors Company (NYSE:GM): Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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