How VALQ Capitalized on June’s Historic Value Migration

This massive wave of inflows pushed value-focused ETFs ahead of growth strategies for year-to-date allocations. This signaled a major reversal considering growth captured a towering $40 billion over the preceding three months.

• Value strategies emerged as the undisputed flow champion in June, pulling in $13 billion in assets as market participants migrated away from growth following a global tech rout.
• The American Century U.S. Quality Value ETF (VALQ) captures this shift by filtering large- and mid-cap companies for value.
• VALQ separates itself from traditional value funds like VTV by maintaining double the technology sector exposure.

If value, quality, and income resonate with investors, then they should take a closer look at the American Century U.S. Quality Value ETF (VALQ C+). Rather than assigning stocks to basic binary style boxes, VALQ takes a different approach by tracking the American Century U.S. Quality Value Index.

The Index screens through large- and midcap U.S. companies, identifying those with a unique three-variable screening architecture: high-quality earnings, attractive relative valuations, and sustainable dividend income. In doing so, the fund steers clear of unvetted speculative plays, and seeks to deliver enhanced risk-adjusted returns relative to standard indices.

An examination of VALQ’s underlying holding attributions highlights the merit of fundamental value screens. Here were the top three performers in June:

1. Applied Materials Inc. (AMAT) (+57.80%): Though housed within the tech sector, Applied Materials checked the boxes for VALQ’s high-quality fundamentals, emerging as the fund’s single largest alpha contributor in June.
2. KLA Corp. (KLAC) (+55.52%): As a specialized semiconductor equipment manufacturing heavyweight, KLA capitalized on enterprise fabrication expansion while maintaining exceptional valuation metrics.
3. Corning Inc (GLW) (+44.56%): Rounding out VALQ’s top three single-stock performers for the month, Corning is a legacy industrial-tech player capitalizing on hardware supply chains amid the AI infrastructure buildout.

The outperformance seen in these tech names differentiates VALQ from other value-focused funds, such as the Vanguard Value ETF (VTV A). While many associate large-cap tech names with growth, companies like Apple, Amazon, and Microsoft are increasingly finding their way into value ETFs, like the iShares Russell 1000 Value ETF (IWD A-). In effect, VALQ could provide investors with exposure to tech names exhibiting strong fundamental characteristics that tilt towards value. VALQ and VTV have just a 33% holdings overlap, but the tech exposure differentiation is apparent with the former having double the exposure to the sector than the latter.

See More: Growth & Value Share Megacaps in Latest Russell Reconstitution

State Street’s recent commentary on value asks a major question heading into the second half of the year. Can value sustain its current momentum as a new corporate earnings season kicks off in July?

If the answer is “yes,” strategies like VALQ are uniquely positioned for this future upside. Furthermore, if tech can right the proverbial ship following June’s sell-off, then VALQ is a compelling option, given its greater tech exposure. Overall, it’s a constant reminder that two funds, irrespective of factor tilt, are never identical, and that VALQ should be in the list of options for investors seeking value in today’s market environment.

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VettaFi LLC (“VettaFi”) is the index provider for VALQ for which it receives index licensing fees. However, VALQ is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VALQ.