Cleaner Exposure to Value Stocks
This ETF allows investors to own cheap stocks without the persistent sector bets that most of its peers make.
Most value index funds have persistent sector biases, overweighting the financial-services and energy sectors, while underweighting technology and healthcare. Such sector bets are a source of active risk, but Morningstar research suggests that they aren't necessary for a value strategy to be successful.
IShares Edge MSCI USA Value Factor ETF (VLUE) matches the market's sector weightings to eliminate this source of unintended risk and targets the cheapest stocks within each sector. This approach should give the fund cleaner exposure to stocks that are truly cheap relative to their peers. The fund's strong value-orientation and low fee build on this advantage. But it does take greater risk than most of its peers, which coupled with its short record tracking its current index, limits the Morningstar Analyst Rating to Bronze.
Alex Bryan has a position in the following securities mentioned above: VLUE. Find out about Morningstar’s editorial policies.