While it is broadly expected that interest rate hikes may be dialed down to 25 basis points this week, concerns over declining consumer spending have kept markets on edge.
Investors are wary that the central bank may interpret a healthier-than-expected GDP growth and labor market tightness as a license to tighten the screw further and overcook the economy toward a severe downturn. This skepticism led to a 1.3% intraday decline in S&P 500 yesterday.
With market volatility expected to continue in the foreseeable future, it could be wise to increase exposure to instruments and assets whose prospects are robust enough to remain relatively unaffected by the turbulence.
To that end, Vanguard Value ETF (VTV), iShares Russell 1000 Value ETF (IWD), and Energy Select Sector SPDR ETF (XLE) could be ideal investments now.
Vanguard Value ETF (VTV)
VTV is an exchange-traded fund launched and managed by The Vanguard Group, Inc. It offers exposure to large-cap companies within the U.S. equity market that exhibit value characteristics. Hence, it is suitable for investors with a relatively longer-time horizon who are seeking to add stability to their portfolios.
With $102.72 billion in AUM, VTV is linked to the MSCI US Prime Market Value Index. Hence, its exposure is heavily tilted toward financials, energy, and industrials.
VTV’s top holding is Berkshire Hathaway Inc. Class B (BRK.B), which has a 3.13% weighting in the fund. It is followed by UnitedHealth Group Incorporated (UNH) at 2.89% and Johnson & Johnson (JNJ) at 2.70%. The fund has a total of 344 holdings, with the top 10 assets comprising 22.58% of AUM.
VTV’s expense ratio is 0.04%, lower than the category average of 0.48%. The fund pays $3.04 per unit annually as dividends. This translates to a yield of 2.10% at the current price, higher than the category average of 1.27%. It saw a net inflow of $1.22 billion over the past month. Its beta is 0.97.
VTV has gained 2% over the past month and 3.2% over the past six months to close the last trading session at $142.49. The fund’s NAV was $142.46 as of January 30, 2023.
VTV’s robustness is reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VTV also has an A grade for Trade and Buy & Hold. Unsurprisingly, it tops the list of 86 funds in the A-rated Large Cap Value ETFs category.
Click here to see all ratings for VTV.
iShares Russell 1000 Value ETF (IWD)
IWD is an exchange-traded fund launched by BlackRock, Inc. It is managed by BlackRock Fund Advisors. The fund seeks to track the performance of the Russell 1000 Value Index by using a representative sampling technique. It provides exposure to large-cap companies that exhibit value characteristics within the U.S. equity market.
With $53.92 billion in AUM, IWD’s holdings are heavily tilted toward financials, energy, and health care. The fund’s top holding is Berkshire Hathaway Inc. Class B (BRK.B), which has a 2.90% weighting in the fund. It is followed by Exxon Mobil Corporation (XOM) at 2.48% and Johnson & Johnson (JNJ) at 2.30%. The fund has a total of 856 holdings, with its top 10 assets comprising 17.7% of its AUM.
IWD has an expense ratio of 0.18%, lower than the category average of 0.48%. The fund pays $2.61 per unit annually as dividends. This translates to a yield of 1.57% at the current price, which is higher than the category average of 1.27%.
IWD’s net inflow came in at $4.9 billion over the past three years. The fund has a beta of 1.01.
IWD has gained 4.1% over the past month to close the last trading session at $157.27 million. The fund’s NAV was $157.28 as of January 30, 2023.
IWD’s fundamental strength is also reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It also has an A grade for Trade and Buy & Hold and a B for Peer.
IWD is ranked #2 of 86 ETFs in the A-rated Large Cap Value ETFs category.
Energy Select Sector SPDR ETF (XLE)
XLE is a sectoral ETF launched by State Street Global Advisors, Inc. and is currently managed by SSGA Funds Management, Inc. The fund offers concentrated exposure to major U.S. energy businesses, including companies in the oil, gas, and consumable fuels and energy equipment and services industries.
With $44.22 billion in AUM, XLE’s top holding is Exxon Mobil Corporation (XOM) which has a 22.96% weighting in the fund. It is followed by Chevron Corporation (CVX) at 19.70% and Schlumberger NV (SLB) at 4.83%. The fund has a total of 25 holdings, with its top 10 assets comprising 74.96% of its AUM.
XLE has an expense ratio of 0.10%, lower than the category average of 0.46%. The fund pays $2.16 annually as dividends. This translates to a 3.75% yield at the current price, higher than the category average of 2.21%.
XLE’s net inflow came in at $965.94 million over the past month and $1.12 billion over the past six months. The fund has a beta of 1.66.
XLE has gained 2.7% over the past month and 16.1% over the past six months to close the last trading session at $89.14. The fund’s NAV was $89.17 as of January 30, 2023.
XLE has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. It also has grade A for Trade, Buy & Hold, and Peer.
XLE tops the list of 46 funds in the B-rated Energy Equities ETFs category.
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VTV shares were trading at $143.35 per share on Tuesday afternoon, up $0.86 (+0.60%). Year-to-date, VTV has gained 2.12%, versus a 5.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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