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ETF Specialist

Despite Its Valuation, This Defensive Equity ETF Is Compelling

Concerns over the valuations of this fund's holdings are overblown.

Mentioned: , , , , , ,

Barron's recently published an article arguing that iShares Edge MSCI Minimum Volatility USA ETF (USMV) is "among the riskiest investments in the market right now." (1) That argument centers around valuations, but the headline numbers don't tell the full story.

By most measures, defensive stocks, like those that USMV favors, are trading at high valuations relative to their historical range. Based on Morningstar's fair value estimates for the stocks that make up USMV's current portfolio, the fund was trading at 1.10 times fair value at the end of August 2019. However, that does not suggest that there's an impending correction or that this fund is a particularly risky investment.

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Alex Bryan has a position in the following securities mentioned above: USMV. Find out about Morningstar’s editorial policies.