2023-04-19 13:57:42 ET
Summary
- The value style was hurt by the SVB crisis and US regional banking turmoil in March.
- With interest rates inching back up lately, value has held its own against growth.
- I see VOOV as attractively priced, but am watching one key price level.
Value stocks have halted their 2023 plunge against growth equities in the last few weeks. The Financials-sector-heavy value niche got rocked in March around the domestic regional banking crisis and as interest rates plunged. Value often outperforms when rates rise, and we saw that for much of 2022 when value notched its best year against the growth style since 2000.
The relative chart below of value vs growth is in a holding pattern, and the next key move may come through this earnings season. I reiterate my buy rating on Vanguard S&P 500 Value Index Fund ETF Shares (VOOV) but am mindful of a neutral chart in the short run.
Value Versus Growth: Consolidating As Earnings Season Ensues
According to the issuer , the Vanguard S&P 500 Value ETF invests in stocks in the S&P 500 Value Index, composed of the value companies in the S&P 500. The fund focuses on closely tracking the index’s return, which is considered a gauge of overall U.S. value stock returns. I view VOOV as a desirable choice for investors seeking low-value (though also often low-quality) domestic large-cap names – the ETF’s annual expense ratio is just 10 basis points, and the 30-day median bid/ask spread is just 0.04%.
Tradeability is decent, but the average daily volume is just under 90,000 shares, per Vanguard, so it is wise to be aware of the bid/ask spread when liquidity is light at certain times of the trading day. VOOV offers a 2.05% trailing 12-month dividend yield, above the S&P 500’s yield of under 1.8%. With more than $3.2 billion in assets under management, VOOV is a stalwart in the ETF space. One strategy is to own VOOV in tax-advantaged accounts while positioning growth ETFs, which are typically lower-yielding, in taxable accounts.
VOOV is an interesting fund in that while being a value ETF, it houses names like Microsoft (MSFT), Amazon (AMZN), and Meta Platforms (META), typically considered on the growth side of the ledger. So, performance will differ from some other more pure value products.
According to Morningstar , it is actually somewhat balanced between the value and growth styles and even features some mid-cap exposure. But with a low 10.5 price-to-earnings ratio, the valuation is attractive.
VOOV: Portfolio and Factor Profiles
VOOV will still be more impacted by the Financials sector movements compared to the S&P 500. That is the ETF’s largest sector weight while Information Technology, Consumer Discretionary, and Communications Services total 37% versus more than 45% for the SPX.
VOOV: Financials Pose A Significant Weight
Seasonally, it is widely known that stocks generally do well in a pre-election year and during the month of April. May through early October can be a rockier stretch for the broad market, though. Also, notice in the chart below from Equity Clock that Value often underperforms the S&P 500 (namely Growth) now through Q3 despite rising on a nominal basis.
Value Typically Underperforms Now Through September
The Technical Take
VOOV ran into resistance at the $155 level that I highlighted back in February. Should the bulls take out that key spot, then a measured move price objective to near $187 would be in play based on the $32 range between the October 2022 low and the persistent $155 all-time high. With the ETF currently under $150, there is still work to do. Moreover, I see support in the $136 to $138 range – so long as higher lows are registered off the Q4 nadir, the bullish thesis remains intact, in my opinion.
The long-term 200-day moving average has inflected modestly positive, which is a good thing, and VOOV is above both that long-term trend indicator and the shorter-term 50-day moving average. Something I will be watching going forward is the volume profile – volume has been on the decline ever since the volatility of 2022. A breakout on a volume spike would be particularly bullish.
VOOV: Bullish Rounded Bottom Forming, Eyeing $155 Resistance
The Bottom Line
I reiterate my buy rating on VOOV based on its low valuation but would also like to see the fund bust through the $155 level.
For further details see:
VOOV: Large-Cap Value Attractively Priced, All Eyes On Earnings Season