Leaning heavily on tech giants like Apple might be considered a value play in today’s market, but investors must also look to diversification in other companies that can offer value-tilted plays. One value-tilted fund to look at that offers diversification that’s not heavily weighted in a select few stocks is the Pacific Global US Equity Income ETF (USDY).
The fund actively invests in U.S. companies with above-average or improving dividends. The fund’s main objective is investing in common stocks of U.S. companies that have above-average dividend yield and that demonstrate financial strength, which are high quality companies with strong balance sheets, predictable earnings and cash flow growth, and a history of dividend growth.
USDY primarily invests in common stocks of large capitalization companies, including REITs. Under normal circumstances, the fund invests at least 80% of its assets in equity securities of U.S. companies that pay regular dividends.
Michael Skillman, the CEO of Cadence Capital Management, said that a fund heavily tilted towards the tech giants like Amazon or Google “is great when it is working, but when it turns, it can work against you.”
“He and his team rebalance the portfolio of the Pacific Global U.S. Equity Income ETF quarterly,” a MarketWatch article noted. “They start with the Russell 1000 Value Index, which has 768 stocks and narrow the group to those with dividend yields that are at least slightly higher than average. Then they place greater weighting on companies that have increased dividends for at least five straight years, with even greater weighting for those that have increased for 10 straight years, and so on. They also screen for companies with sufficient liquidity and weed out those in financial distress.”
Another option to consider is the American Century STOXX U.S. Quality Value ETF (VALQ). VALQ seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the iSTOXX® American Century USA Quality Value Index (the underlying index). Under normal market conditions, the fund invests at least 80% of its assets in the component securities of the underlying index. The underlying index is designed to select securities of large- and mid-capitalization companies that are undervalued or have a sustainable income.
One more value-titled fund to consider is the Invesco Dynamic Large Cap Value ETF (PWV). PWVseeks to track the investment results (before fees and expenses) of the Dynamic Large Cap Value IntellidexSM Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying intellidex. The underlying intellidex is composed of large-capitalization U.S. value stocks that the Intellidex Provider includes principally on the basis of their capital appreciation potential.
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