3 Value ETFs To Buy Now – IWD, IWS, IWN
Value investing is one of the most popular ways to invest.
And for good reason…
Investors like Warren Buffett have used the strategy to generate huge profits for Berkshire Hathaway (BRK.A) and his investors.
The strategy is simple in theory. Invest in companies that the market has undervalued. But in practice, this is often easier said than done.
The key to value investing is estimating a company’s intrinsic value. This is the actual value of a company’s business and assets. These include both tangible and intangible assets.
Value investors typically look for things like below average price-to-book or price-to-earnings ratios to identify value stocks.
This type of investing also requires patience. A stock can remain undervalued for long periods of time. So you must be able to endure the waiting period between when you identify the undervalued stock and when the rest of the market catches up and pushes the stock price higher.
Here’s the thing… valuations of growth stocks have become stretched after a five year bull market. Today, investors are increasingly turning toward value investment strategies as a safer way to invest. And this trend is likely to continue.
Here are three ETFs you can buy to add exposure to value stocks…
iShares Russell 1000 Value ETF (IWD)
IWD is the most popular value ETF with more than $23 billion in assets under management. This ETF tracks an index of large and mid-cap US stocks that have value characteristics.
IWD is up 8.1% year-to-date. It has avoided the wild swings that have taken place in ETFs that focus on growth stocks. It continues to march up and to the right across the chart in a solid uptrend.
Like most value oriented ETFs, IWD also pays a solid dividend. Its current annual dividend yield is 1.9%.
There are 690 stocks in this ETF. The sectors with the largest weighting are financial services with 28.7% and energy with 13.8%. And the top two holdings are Exxon Mobil (XOM) 4.4% and General Electric (GE) 2.7%.
iShares Russell Midcap Value Index (IWS)
Mid-Cap stocks seem to be the sweet spot for value investing.
These companies are large enough to be well established but small enough to fly under the radar of many analysts. The lack of analyst coverage can lead the market to mis-value these stocks more than large cap stocks that have lots of analysts covering every detail of their business.
IWS gets its appeal from the fact that it’s solely focused on mid-cap stocks.
It has racked up a gain of 9.5% year-to-date. It also has a solid 1.7% annual dividend yield.
With 566 stocks in this ETF, it’s a broad approach to mid-cap value investing.
This ETF is dominated by financial services. In fact, nearly a third of all of IWS’ holdings fall into the category.
iShares Russell 2000 Value ETF (IWN)
Small cap stocks are having a rough year. The Russell 2000 small cap index is down 1.8% so far this year.
But that type of performance is music to a value investors’ ears. After all, value investors are looking for stocks that are being undervalued by the market.
IWN is focused on small cap stocks that have the characteristics of value stocks.
So far this year, IWN hasn’t been able to gain any traction. It managed a gain of more than 4% at one point this year but it has given back all of those gains in July.
This ETF is skewed heavily toward financial services as well… 38.6% of the 1,325 stocks in this ETF fall into the financial services sector.
IWN is an interesting choice for investors truly seeking an area of the stock market that is undervalued.
Here’s the upshot…
Value investing is one of the most popular strategies right now. And these three ETFs are a simply way for you to tilt your portfolio towards value stocks.
Good Investing,
Corey Williams
Category: ETFs, Investment Style ETFs
