Value ETFs & Stocks To Beat Market Volatility

The stock market has been on a stellar ride this year courtesy of a pickup in global economic activity, robust corporate earnings, and rising consumer confidence. But bouts of volatility and uncertainty have threatened the bull run lately.

This is especially true as United States’ tensions with North Korea reached an alarming stage that could lead to a trade war with China, the largest trading partner of North Korea, thus sparking off threats of a global recession. Doubts over the implementation of Trump’s agenda, government shutdown fears, uncertain Fed policy as well as two hurricanes – Harvey aftermath and Irma – added to the gloom (read: ETFs to Lose If Trump Bans Trade With North Korean Partners).

Amid these uncertainties, value investing appears safe and appealing to investors. The strategy includes stocks with strong fundamentals — earnings, dividends, book value and cash flow — that trade below their intrinsic value and are undervalued by the market.

Why Value Investing?

Value stocks often overreact to both positive and negative news, resulting in share price movement that does not reflect a company’s true long-term fundamentals. This creates buying opportunities in such stocks at depressed prices and shows the potential for capital appreciation when the stock finally reflects its true market price.

As a result, value stocks have the potential to deliver higher returns and exhibit lower volatility compared to growth and blend counterparts. In fact, these stocks outperform the growth ones across all asset classes when considered on a long-term investment horizon and are less susceptible to trending markets (read: 6 ETF Picks for September).

Given this, investors may want to consider a nice value play in the current volatile market environment. For them, we have presented five ETFs and stocks that easily crushed the market over a month and are likely to continue their outperformance if volatility persists.

ETF Picks

Using our database, we have selected value ETFs that provide exposure to the broad stock market instead of a particular sector and have a Zacks Rank # 2 (Buy) or 3 (Hold) with a decent level of AUM of above $50 million.

Guggenheim S&P 500 Pure Value ETF (RPV - Free Report)

This fund provides pure exposure to the large-cap value segment of the U.S. equity market by tracking the S&P 500 Pure Value Index.

Zacks ETF Rank: #3
Expense Ratio: 0.35%
AUM: $820.3 million  
No. of Stocks: 108
YTD Return: 3.0%

Vanguard Mid-Cap Value ETF (VOE - Free Report)

This fund targets the U.S. mid-cap segment and follows the CRSP US Mid Cap Value Index (read: Buy-Ranked Mid-Cap ETFs for a Shaky Market).

Zacks ETF Rank: #2
Expense Ratio: 0.07%
AUM: $7.4 billion
No. of Stocks: 202
YTD Return: 6.4%

Vanguard Value ETF (VTV - Free Report)

This fund seeks to track the CRSP US Large Cap Value Index, which measures the performance of the largest U.S. value stocks.

Zacks ETF Rank: #3
Expense Ratio: 0.06%
AUM: $32.3 billion  
No. of Stocks: 330
YTD Return: 5.4%

iShares Russell 1000 Value ETF (IWD - Free Report)

This ETF offers exposure to U.S. companies that are thought to be undervalued by the market relative to comparable companies.

Zacks ETF Rank: #3
Expense Ratio: 0.20%
AUM: $35.6 billion  
No. of Stocks: 718
YTD Return: 3.9%

iShares S&P 500 Value ETF (IVE - Free Report)

This fund also offers exposure to large U.S. companies that are potentially undervalued relative to comparable companies.

Zacks ETF Rank: #3
Expense Ratio: 0.18%
AUM: $13.4 billion  
No. of Stocks: 349
YTD Return: 4.2%

Stock Picks

For stocks, we have chosen four top picks using the Zacks Stock Screener that fits our criteria: a Zacks Rank #1 (Strong Buy) or 2, a Value Style Score of A, Zacks Industry Rank within the top 10%, market cap of over $1 billion, and positive relative price change (compared with the S&P 500). Our chosen stocks are:

Alcoa Corp. (AA - Free Report)

This New York-based company is a global industry leader in bauxite, alumina and aluminum products.

Zacks Rank: #2
Zacks Industry Rank: Top 7%
Market Cap: $8.09 billion
Relative Price Change: 43.68

Aflac Incorporated (AFL - Free Report)

This is a Georgia-based general business-holding company that acts as a management company, overseeing the operations of its subsidiaries by providing management services and making capital available.

Zacks Rank: #2
Zacks Industry Rank: Top 4%
Market Cap: $32.63 billion
Relative Price Change: 6.57

Micron Technology Inc. (MU - Free Report)

This Idaho-based company is one of the leading worldwide providers of semiconductor memory solutions (read: Here's Why Semiconductor ETFs Could Continue Their Rally).

Zacks Rank: #1
Zacks Industry Rank: Top 1%
Market Cap: $35.37 billion
Relative Price Change: 33.6

Anthem Inc. (ANTM - Free Report)

This Indiana-based company offers health benefits in the United States.

Zacks Rank: #2
Zacks Industry Rank: Top 6%
Market Cap: $51.48 billion
Relative Price Change: 22.31

Pilgrim's Pride Corporation (PPC - Free Report)

This Colorado-based player is one of the largest chicken companies in the United States, Mexico and Puerto Rico.

Zacks Rank: #1
Zacks Industry Rank: Top 5%
Market Cap: $7.33 billion
Relative Price Change: 37.43

Bottom Line

Value ETFs and stocks generally outperform during periods of muted market performance as we are currently seeing. As such, investors shouldn’t forget the value space and should take a closer look at a few of the attractive value ETFs in this segment for excellent exposure and some outperformance in the weeks to come.
 

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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