Is American Century U.S. Quality Value ETF (VALQ) a Strong ETF Right Now?

The American Century U.S. Quality Value ETF (VALQ) was launched on 01/11/2018, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Value category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Managed by American Century Investments, VALQ has amassed assets over $214.38 million, making it one of the larger ETFs in the Style Box - All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the AMERICAN CENTURY U.S. QUALITY VALUE INDX.

The American Century U.S. Quality Value Index seeks to select securities of large and mid-capitalization companies that are undervalued or have sustainable income.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for this ETF are 0.29%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.71%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

VALQ's heaviest allocation is in the Information Technology sector, which is about 26.30% of the portfolio. Its Industrials and Consumer Staples round out the top three.

When you look at individual holdings, Gilead Sciences Inc Common Stock Usd.001 (GILD) accounts for about 2.67% of the fund's total assets, followed by Comcast Corp Class A Common Stock Usd.01 (CMCSA) and Cardinal Health Inc Common Stock (CAH).

Its top 10 holdings account for approximately 22.76% of VALQ's total assets under management.

Performance and Risk

The ETF return is roughly 2.90% so far this year and is up about 12.27% in the last one year (as of 02/19/2024). In the past 52-week period, it has traded between $45.72 and $55.17.

VALQ has a beta of 0.94 and standard deviation of 15.24% for the trailing three-year period. With about 228 holdings, it effectively diversifies company-specific risk.

Alternatives

American Century U.S. Quality Value ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $9.50 billion in assets, iShares Core S&P U.S. Value ETF has $15.85 billion. DFAT has an expense ratio of 0.28% and IUSV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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American Century U.S. Quality Value ETF (VALQ): ETF Research Reports

Comcast Corporation (CMCSA) : Free Stock Analysis Report

Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report

Cardinal Health, Inc. (CAH) : Free Stock Analysis Report

iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports

Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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