The stock market has now broken out to new all-time highs and many investors may be ill-positioned to take advantage of the latest surge. Based on sentiment indicators, fund flows, and structural positioning the overwhelming momentum has been with defensive areas of the market.
The unrelenting decline in interest rates and grasp for yield has been a tremendous beneficiary to traditional safe havens. Treasury bonds, utility stocks, REITs, low volatility indexes, and precious metals have all surged this year.Â
But what about the areas that have been overlooked or just plain abandoned altogether?
Some of these underrated categories include: financials, health care, and technology stocks. These key sectors have meaningfully lagged the market and as such are sporting much more attractive fundamental valuations. They may also be ripe to play catch-up as the next rotation cycle takes hold and underinvested portfolio managers look for bargains.
The following exchange-traded funds offer diversified, low-cost, and transparent exposure to a wide array of value stocks in an easy-to-access investment vehicle.
iShares S&P 500 Value ETF (IVE)
IVE isn’t the biggest large-cap value ETF in the market, but it may be one of the easiest to understand. This fund has $10.6 billion dedicated to a group of 360 stocks picked from the S&P 500 Index for their intrinsic value characteristics.
This market cap weighted index allocates a greater percentage of the underlying assets to the largest stocks. Top holdings in IVE include well-known names such as Exxon Mobil Corp (XOM), Berkshire Hathaway Inc. (BRK-B), and AT&T Inc. (T). Furthermore, the largest sectors represented are financials (23%), energy (13%), and healthcare (12%).
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The fund charges a reasonable net expense ratio of 0.18% and has a 30-day SEC yield of 2.43%. It also sports a price/earnings ratio of 16.74 versus the iShares Core S&P 500 ETF (IVV) P/E of 19.77.
