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Hedge Fund Manager Makes the Case for Value Investing

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AQR Capital Management founder Clif Asness addressed whether value investing can work today via a blog post entitled “Is (Systematic) Value Investing Dead?” The extended bull market certainly put value investing in the rear-view mirror for investors riding the momentum of growth, which had them wondering if the tried-and-tested value investing style was on its last legs?

“No, it’s not,” the blog simply said. “Quite the opposite.”

“Besides just an inherent discomfort with randomness, part of the issue is confusion about why value works at all. It does not depend on getting big events or trends right. It does not depend on having perfect accounting information,” the AQR post noted. “Certainly, it does not require a lack of massive technological change over time. No matter what the situation, it simply needs investors to net overreact. Companies that are cheap need to tend to be a bit too cheap for whatever set of facts exists at that time and expensive companies need to tend to be a bit too expensive.”

Click here to read the rest of the AQR blog post.

Value-Tilted ETFs to Consider

For ETF investors looking for value plays, one ETF play that’s worth a look involves sifting through the Nasdaq to find value via the Principal Contrarian Value Index ETF (PVAL). PVAL seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq U.S. Contrarian Value Index (the “index”).

Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the index at the time of purchase. The index uses a quantitative model designed to identify equity securities in the Nasdaq US Large Mid Cap Index (the “parent index”) that appear to be undervalued by the market relative to their fundamental value.

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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