Are investors overlooking value investing right now? There’s an argument to be made there, especially following last week’s sell-off in growthier names. The U.S. stock market is very expensive right now, with megacap tech names a potential vulnerability for portfolios. An active approach to value investing, in particular, could provide meaningful benefits to portfolios. A strategy like the T. Rowe Price Value ETF (TVAL ) could provide that solution.
See more: Active ETFs to Hit $4 Trillion AUM by 2030? What You Need to Know
The fund charges a 33-basis point fee for its services. Launched just over a year ago, the strategy has returned 19.7% in that time. That has outperformed its benchmark of 14.5%, per T. Rowe Price data.
TVAL looks for long-term capital growth via undervalued equities poised to outperform. It leans on T. Rowe Price’s fundamental research capabilities to take a bottom-up stock approach. In doing so, it assesses metrics like undervalued market segments, dividend yield, and other ratios like book value and cash flow.
Why might value investing stand out in the near to medium term? Rate cuts could benefit undervalued firms more than potentially overvalued growth names, especially those out-of-favor quality companies hindered by higher rates. Indeed, firms working steadily under the radar could take cheaper borrowing costs as an opportunity to take a leap forward.
What’s more, while rate cuts may help the whole market, they won’t necessarily solve other risks in the growth side of the market. AI drove big gains in tech to start this year, but if AI firms fail to deliver, or even just underwhelm, it could have the makings of a bubble.
An active ETF approach to value investing could help a strategy like TVAL set itself apart. Where an index fund can track large-cap growth names well, an active approach can set itself apart when looking for less obvious value opportunities. With flexibility and close scrutiny, a value-focused active ETF like TVAL could stand out in the closing chapters of 2024.
For more news, information, and analysis, visit our Active ETF Channel.
