Bargain Bin: ETFs for value hunters

From Reuters - January 3, 2018

NEW YORK (Reuters) - Think of the stock market right now as a high-school cafeteria. The most popular kids in school are growth investors, high-fiving and riding a multi-year bull run.

Meanwhile, the geeky kids off to the side, eating lunch by themselves, are the value investors.

But those geeks often end up on top as adults. So even in this growth-oriented economy, you would be wise to have a value component to your portfolio.

For a double bargain, look to value-driven exchange-traded funds, which not only offer rock-bottom management fees but in some cases have been matching or even exceeding the broader market in gains.

Given how strong a bull market we have had, there will be an inevitable rotation to value, said Todd Rosenbluth, director of ETF and mutual fund research at independent advisory firm CFRA. In fact, value has already showing signs of improvement.

Take the Deep Value ETF from TWM funds. As the name implies, the fund contains in its top 10 holdings the stocks of a number of firms that have been battered, most notably in retail, including Macys Inc, Target Corp, Kohls Corp and Gap Inc.

Also represented in the Deep Value fund are some long-in-the-tooth tech firms like Seagate Technology PLC and Xerox Corp, and pharma play Gilead Sciences Inc. The result is an average price-earnings ratio of around 13, well below the S&P 500s collective P/E which is now over 25.

Those beaten-up names might make investors a little queasy, especially since this ETF is so concentrated with just 20 stocks. But you cannot argue with the performance: It boasts one-year returns of 23.1 percent, matching the S&P 500, to add to 2016s 24.8 percent.


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