Best Value ETFs for Q2 2022

Value investing is the practice of identifying undervalued stocks in an effort to capitalize on the market’s underestimation of their intrinsic value. Typically, investors look to a company’s fundamentals, comparing them with similar businesses to identify potentially undervalued stocks. Value exchange-traded funds (ETFs) allow investors to buy baskets of value stocks with a single investment. An ETF can offer a more diversified way to invest in a value strategy because your money is spread across many stocks.

Key Takeaways

  • Value stocks underperformed the broader market over the past 12 months.
  • The value exchange-traded funds (ETFs) with the best one-year trailing total returns are IWS, VBR, and EFV.
  • The top holdings of these ETFs are Marvell Technology Inc., Diamondback Energy Inc., and Shell PLC, respectively.

There are 15 value smart beta ETFs that trade in the United States, excluding inverse and leveraged ETFs, as well as ETFs with less than $50 million in assets under management (AUM). For the purposes of our list, Investopedia is defining value funds as smart beta funds that broadly follow a value factor strategy.

Value stocks, as measured by the S&P 500 Value Index, have underperformed the broader market over the past 12 months, with a total return of 14.6% compared with the S&P 500’s total return of 15.9%, as of March 3, 2022. The best-performing value ETF for the second quarter (Q2) of 2022, based on performance over the past year, is the iShares Russell Mid-Cap Value ETF (IWS).

We examine the three best value ETFs below. All numbers below are as of March 3, 2022.

  • Performance Over One-Year: 12.1%
  • Expense Ratio: 0.23%
  • Annual Dividend Yield: 1.34%
  • Three-Month Average Daily Volume: 580,516
  • Assets Under Management: $14.8 billion
  • Inception Date: July 17, 2001
  • Issuer: Blackrock Financial Management

IWS seeks to track the Russell MidCap Value Index, an index of mid-cap U.S. equities that exhibit value characteristics. Financials, industrials, and real estate stocks occupy the largest portions of the portfolio. Relative to some other value ETFs, IWS utilizes a methodology with a fairly broad definition of value stocks. Investors looking for a more targeted approach to value names may look to other value funds as an alternative.

The top holdings of IWS include Marvell Technology Inc. (MRVL), a semiconductor manufacturer; Marathon Petroleum Corp. (MPC), a petroleum refining, marketing, and transportation company; and Archer-Daniels-Midland Co. (ADM), a food processing and commodities trading company.

  • Performance Over One-Year: 10.1%
  • Expense Ratio: 0.07%
  • Annual Dividend Yield: 1.53%
  • Three-Month Average Daily Volume: 626,916
  • Assets Under Management: $27.0 billion
  • Inception Date: Jan. 26, 2004
  • Issuer: Vanguard

VBR tracks the CRSP US Small Cap Value Index, which targets a diversified group of small-cap value companies. The fund is highly diversified, with nearly 1,000 holdings as of Jan. 31, 2022. Financials stocks make up the largest portion of the portfolio, at 22.9%, followed by industrials and consumer discretionary companies.

The top holdings of VBR include Diamondback Energy Inc. (FANG), a hydrocarbon exploration and energy company; Signature Bank (SBNY), a full-service commercial bank operating primary in the northeastern U.S.; and VICI Properties Inc. (VICI), a real estate investment trust (REIT), specializing in casinos.

  • Performance Over One-Year: 0.6%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 2.91%
  • Three-Month Average Daily Volume: 4,388,842
  • Assets Under Management: $16.4 billion
  • Inception Date: Aug. 1, 2005
  • Issuer: Blackrock Financial Management

EFV tracks the MSCI EAFE Value Index, which is comprised of companies in developed markets in Europe, Australia, Asia, and the Far East that are thought to be undervalued by the market. The fund targets developed market equities, excluding the U.S. and Canada. Financials stocks make up just over a quarter of the portfolio, followed by industrials and materials stocks. Companies based in Japan, U.K., and Germany receive the largest representation in the portfolio.

The top holdings of EFV include Shell PLC (SHEL:LON), the British multinational oil and gas company; Toyota Motor Corp. (7203:TKS), the Japan-based automotive manufacturer; and Novartis AG (NOVN:SWX), the Swiss pharmaceutical company.

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