Every year by now, market forecasters share equity market predictions. These forecasts often include whether growth or value stocks will lead the charge. Yes, “the charge,” as rarely does anyone forecast a market correction despite their regular frequency. However, little attention is paid to what’s inside the S&P 500 Growth and S&P 500 Value indexes that cause them to rise or fall in value.
These indexes were rebalanced annually in late December. The S&P 500 Growth Index measures constituents from the S&P 500 that are classified as growth stocks based on three factors. Those are sales growth, the ratio of earnings change to price, and momentum. Meanwhile, the S&P 500 Value measures constituents from the S&P 500 that are classified as value stocks based on three factors. Those are the ratios of book value, earnings, and sales to price.
ETFs to Gain Growth or Value Exposure
The three largest U.S. asset managers offer ETFs that track these indexes. For growth, there are the iShares S&P 500 Growth ETF (IVW ), the SPDR Portfolio S&P 500 Growth ETF (SPYG ), and the Vanguard S&P 500 Growth ETF (VOOG ). For value, there are the iShares S&P 500 Value ETF (IVE ), the SPDR Portfolio S&P 500 Value ETF (SPYV ), and the Vanguard S&P 500 Value ETF (VOOV ).
These ETFs sound the same so, it might not be surprising that what is inside is also similar. However, I don’t just mean the three S&P 500 Growth products and the three S&P 500 Value products. I mean also the two iShares, the two SPDR, and the two Vanguard ETFs.
What’s Inside an ETF Matters
There were 401 holdings in the S&P 500 Value ETFs and 208 holdings in the S&P 500 Growth ETFs. A reminder: There are 503 stocks in the S&P 500 due to a few dual share classes. The S&P 500 Growth and the S&P 500 Value indexes are not mirror images of one another.
Apple, Amazon.com and Microsoft are the three largest holdings in value-focused IVE, SPYV, and VOOV. They are also among the top five positions in growth-focused IVW, SPYG, and VOOG. Meanwhile, Berkshire Hathaway and JPMorgan Chase are among the top 10 holdings in the S&P 500 Value ETFs, with an approximately 3% of assets weighting. This is a similar weighting for those financial stocks in the S&P 500 Growth stocks. Megacap growth stocks and megacap value stocks are often one and the same.
IVW Top Holdings
IVE Top Holdings
Nvidia & Procter & Gamble Are Not In the Same Funds
However, there are many stocks that are exclusive to the S&P 500 Growth ETFs or to the Value ones. Nvidia is a good example, as the semiconductor giant is the top holding for IVW, at 13% of assets. Meta Platforms and Tesla are others found only in the S&P 500 Growth ETFs and not their value siblings.
In contrast, Exxon Mobil, Johnson & Johnson, and Procter & Gamble are found only in IVE and the other S&P 500 Value ETFs.
So while many of us like to make top-down predictions, we should also make sure to have a view from the bottom up. Value could make a relative comeback this year due to what many think of as growth stocks. Apple’s and Microsoft’s relative success will be driving many S&P-500-related ETFs in 2025.
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