Value stocks and related exchange traded funds climbed Wednesday as major indices closed out the quarter near record highs, following a rally in the growth style over July.
“We’ve seen a significant preference for cyclicals through May, and in June we’ve seen a major preference shift to growth, or ‘tech-plus stocks,’” Tim Ghriskey, chief investment strategist at Inverness Counsel, told Reuters. “It’s been a dramatic change.”
Looking ahead, optimism over the economic recovery, bets on more fiscal stimulus, and confidence that the Federal Reserve will maintain its support of credit markets have helped value over growth stocks in recent days, the Wall Street Journal reports.
“This market is an environment that looks very attractive because we have all this pent-up demand,” Kristina Hooper, chief global market strategist at Invesco, told the WSJ. “This all suggests that the economic rebound will be powerful in the back half of this year.”
Investors interested in a targeted approach to the value segment can look to the American Century STOXX U.S. Quality Value ETF (VALQ). VALQ’s stock selection process includes a value score based on value, earnings yield, and cash flow yield, along with a sustainable income score based on dividend yield, dividend growth, and dividend coverage.
The American Century Focused Large Cap Value ETF (FLV) tries to achieve long-term returns through an investment process that seeks to identify value and minimize volatility. FLV holdings and value stocks usually trade at lower prices relative to fundamental measures of value, like earnings and the book value of assets.
Lastly, the Avantis U.S. Small Cap Value ETF (AVUV), an actively managed ETF, seeks long-term capital appreciation. The fund invests primarily in U.S. small cap companies and is designed to increase expected returns by focusing on firms trading at what are believed to be low valuations with higher profitability ratios.
For more news, information, and strategy, visit the Core Strategies Channel.