IVE - IVE: It's Value's Time Now
2024-01-13 11:56:27 ET
Summary
- The iShares S&P 500 Value ETF is a passively managed fund that provides exposure to the large-cap value segment of the US equity market.
- Investing in value stocks can offer stable, long-term returns and a cushion against market downturns.
- IVE holds diversified holdings, including Berkshire Hathaway, JPMorgan Chase, Exxon Mobil, Johnson & Johnson, and UnitedHealth Group.
I'm growing increasingly confident that value will likely outperform growth this year as Technology takes a backseat to other sector momentum plays. In the same way that Energy lagged last year after having been the standout performer in 2022, I suspect Technology this year suffers a similar fate. When we look at the Technology Select Sector SPDR ETF ( XLK ) relative to the S&P 500 ( SPY ), we can see Tech leadership is very extended, and while the trend still looks intact, I suspect this breaks downward in a definitive way soon as the recession narrative re-emerges.
That's why the iShares S&P 500 Value ETF ( IVE ) should be on your radar if you're bullish on stocks this year but leery of staying investing in prior leaders. IVE is a passively managed fund designed to provide broad exposure to the large-cap value segment of the US equity market. Incepted on May 22, 2000, the fund is sponsored by BlackRock, one of the world's leading asset management firms. With assets exceeding $27 billion, IVE is among the largest ETFs focusing on the large-cap value segment.
Investing in value stocks presents a compelling case for those seeking stable, long-term returns, as opposed to the often volatile and speculative nature of growth stocks. Value stocks are typically characterized by their lower price relative to fundamental financial metrics such as earnings or book value, suggesting they may be undervalued by the market. This undervaluation can provide a margin of safety for investors, offering a cushion against market downturns.
The important thing to note here is that Value tends to perform relatively better in more volatile cycle. If we look at IVE on the value side relative to the Russell 1000 Growth ETF, we can clearly see that the 2000-2002 bubble burst, and the 2022 bear market both resulted in growth underperforming value, consistent with the margin of safety idea on a relative basis.
The fund's primary objective is to track the performance of the S&P 500 Value Index, before any fees and expenses. This index measures the performance of the large-capitalization value sector of the US equity market. It is a subset of the S&P 500 and comprises stocks within the S&P 500 that exhibit strong value characteristics.
ETF Holdings: Top 5 Individual Positions
A crucial aspect of any ETF evaluation is an examination of its holdings. IVE holds a diversified range of 444 holdings. Top positions include:
- Berkshire Hathaway Inc Class B ( BRK.B ) : a vast American conglomerate with a diverse portfolio of businesses. It's spearheaded by the renowned investor Warren Buffett.
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JPMorgan Chase ( JPM ) : a preeminent global financial institution, boasting assets worth approximately $3.7 trillion.
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Exxon Mobil ( XOM ) : among the giants of the oil and gas industry, holding a significant position as a publicly traded company.
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Johnson & Johnson ( JNJ ) : known for its innovation and production in three critical sectors: medical devices, pharmaceutical products, and consumer packaged goods.
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UnitedHealth Group ( UNH ): a multifaceted healthcare enterprise.
These top 5 holdings account for around 12% of the total assets under management. I like that these are holdings not typically largely weighted in most core portfolios, and that the fund is very diversified because of this as a result. These are also all companies that would be less susceptible to a big cyclical downturn, as we always need Oil, banking, and healthcare.
Sector Composition and Weightings
Value is driven primarily by Financials, Health Care, and Industrials in general as a style. Technology at 8.15% to me is a big plus.
A Comparison Against Peers
IVE competes with several other ETFs in the large-cap value space. Notable competitors include the Vanguard Value ETF ( VTV ), the SPDR Portfolio S&P 500 Value ETF ( SPYV ), and the Schwab U.S. Large-Cap Value ETF ( SCHV ).
When compared against these peers, IVE's annual operating expenses are 0.18%-relatively higher than its counterparts. However, IVE has managed to keep up with its slightly cheaper peers in terms of performance.
Pros and Cons: Why Invest in IVE?
IVE offers a balanced exposure to the US large-cap value segment, allowing for potential outperformance during periods of market volatility and economic downturns. Furthermore, its broad and diversified holdings mitigate company-specific risks, making it a safer bet for conservative investors.
However, IVE's relatively high expense ratio, when compared to its peers, is a downside. Investors must weigh the potential returns against the costs associated with the fund.
Conclusion: To Invest or Not to Invest?
IVE offers an attractive investment opportunity for those seeking long-term growth through exposure to value stocks in the S&P 500. I much prefer value tilted portfolios here at this point in the cycle, and think this can serve as a core holding for an equity allocation.
For further details see:
IVE: It's Value's Time Now