Like the S&P 500? Loving Value? Check Out the RPV ETF

RPV seeks to track the investment results (before fees and expenses) of the S&P 500® Pure Value Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.

The underlying index is composed of a subset of securities from the S&P 500® Index that exhibit strong value characteristics. Invesco’s strategy includes:

1. Assigning securities two “style scores” – one for value and one for growth – based on the characteristics of the issuer. The “value score” is measured using three factors: book-value-to-price ratio, earnings-to-price ratio, and sales-to-price ratio. The “growth score” is measured using three other factors: three-year sales per share growth, the three-year ratio of earnings per share change to price per share, and momentum (the 12-month percentage change in price).
2. The ratio between the growth score and the value score is used to rank each stock as either deep value, blend, or deep growth, and only the deep value stocks are selected and are factor weighted such that securities demonstrating the strongest value characteristics receive proportionally greater weights.

In its one-year chart, RPV outperformed its growth cousin, the Invesco S&P 500 Pure Growth ETF (RPG B), by almost 25%. RPV is also up 18% so far in 2021.

The pandemic was supposed to be value’s time to shine, but it turned out that growth actually gained steam following the pandemic sell-offs in March. However, the tide started to turn during the fall as news of a vaccine took hold of the capital markets.

“Since September, however, value has gained some momentum as investor focus shifted to undervalued sectors of the market,” a Guru Focus article said. “Generally, value investing strategies incline toward sectors such as financial services and energy, which include cyclical stocks. The fast-growing technology sector is often ignored by value investors because of the sky-high valuation multiples at which these companies tend to trade in the market.”

“Value companies with high operating leverage tend to perform better during the economic recovery phase of the business cycle,” the article added. “Arguably, I think the United States is now entering one of the strongest economic recoveries in the history of corporate America, which paints a promising picture for undervalued, high-quality companies that are likely to benefit from the revival of business activities in the country.”

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