U.S. stocks have performed quite well through the first
two-and-a-half months of 2013, but what may come as a surprise to
some is the out-performance of so-called value sectors.
As measured by some major sector
, funds such as the Consumer Staples Select Sector SPDR (NYSE:
) and the Health Care Select Sector SPDR (NYSE:
) have been leaders this year.
The Technology Select Sector SPDR (NYSE:
), though it is up year-to-date, cannot be accurately described
as a market leader. All of that is to say investors have shown a
distinct preference for value names over growth fare to this
point in 2013.
to low volatility ETFs affirm that assertion
. So do massive one-day creations in a pair of popular dividend
On Wednesday alone, the Vanguard High Dividend Yield ETF
) raked in $1 billion in new assets while the iShares High
Dividend Equity Fund (NYSE:
) added $281 million in fresh cash,
according to Index Universe data
Fortunately, investors that favor value over growth have a
plethora of options with ample upside potential in the current
WisdomTree Total Dividend Fund (NYSE:
) The WisdomTree Total Dividend Fund is not the largest dividend
on the market, but it has been growing at a decent clip. DTD had
$282.6 million in assets at the end of
and that total is now over $294.4 million. More importantly, DTD
has returned nearly three percent in the past month and almost
seven percent year-to-date.
At the sector level, DTD does a good job of mixing together
less volatile groups with higher beta fare as financials,
staples, technology and health care occupy four of the five
largest sector weights within the ETF.
There are some other traits about DTD that conservative
investors will like. Since the fund's index was born in mid-2006,
it has outperformed the Russell 3000 Index and the Russell 3000
Value Index while sporting a lower beta and lower standard
according to WisdomTree data
. DTD also pays a monthly dividend.
First Trust Large Cap Value AlphaDEX Fund (NYSE:
) FTA does not weight its 207 constituents based on market value
or dividend yield. Rather, First Trust takes "the stocks from the
S&P 500 Value Index against all the stocks in the S&P 500
Index on growth factors including three, six and 12-month price
appreciation, sales to price and one year sales growth, and
separately on value factors including book value to price, cash
flow to price and return on assets,"
according to FTA's web site
Clearly, there are some growth traits factored into FTA's
screening process and that means FTA is slightly more volatile
than its name might imply. FTA has a three-year standard
deviation of 16.85 percent compared to 16.17 percent for the
S&P 500 Value Index. However, over the past three months,
three years and five years, FTA's underlying index has
outperformed the S&P 500 and the S&P 500 Value Index,
according to First Trust data.
Energy stocks account for 20.4 percent of FTA's weight, by far
the largest sector weight. Top non-energy holdings include Dell
), Xerox (NYSE:
) and Gannett (NYSE:
). The rub with FTA is a 0.7 percent annual expense ratio, which
is high for this genre of ETFs.
PowerShares Dynamic Large Cap Value Portfolio (NYSE:
) Considering that it just turned eight years old and that it has
almost $533 million in assets under management, the PowerShares
Dynamic Large Cap Value Portfolio does not get much attention.
PWV's index applies "a rigorous 10 factor style isolation process
to objectively segregate companies into their appropriate
investment style and size universe,"
according to PowerShares
From there, potential constituents for the ETF are evaluated
on earnings momentum and quality, management, value and other
factors. The result is PWV looks a lot like the Dow Jones
Industrial Average, at least among its top-10 holdings as nine
are Dow stocks with Wells Fargo (NYSE:
) being the outlier. Overall, the ETF is home to 14 Dow
PWV is the type of ETF an investor can hold for extended time
frames and its performance proves as much. Since its March 2005
debut, PWV has surged over 61 percent. The SPDR Dow Jones
Industrial Average ETF (NYSE:
) is up 37.2 percent over the same time.
For more on ETFs, click
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