By Matt Wagner, CFA, Associate Director, Research
WisdomTree pioneered fundamental weighting as a novel approach to rules-based value investing. Instead of using market capitalization, a company’s weight in indexes is based on dividends or earnings.
Another unique value strategy is the WisdomTree Value Fund (WTV), which selects and weights companies based on shareholder yield.
Shareholder Yield = Dividend Yield + Net Buyback Yield
WTV Long-Term Performance and Rankings
Over a prolonged stretch where value indexes have lagged broad benchmarks, selecting companies based on shareholder yield has shone.
WTV ranks in the top decile of the Large Value category across standardized periods.*
WTV Performance and Peer Rankings
For the most recent month-end and standardized performance, click here.
Recent Performance and Attribution
Over the last 12 months, WTV outperformed the Russell 1000 Value Index by more than 600 basis points.
This outperformance spanned across sectors, with positive contributions from 8 out of 11 sectors.
One-Year Sector Attribution: WTV vs. Russell 1000 Value Index
While some investors use shareholder yield to replace existing value mandates, it also serves as a complement, or diversifier, to other value approaches. WTV has only a 22% overlap with the Russell 1000 Value Index.
WTV was rebalanced this December, increasing weight to companies with higher shareholder yields and reducing weight to companies with lower shareholder yields.
After the rebalance, the Fund’s shareholder yield increased from 6.5% to 7.9% while maintaining a higher return on equity (ROE) than both the Russell 1000 Value and the S&P 500.
Compared to the Russell 1000 Value, the Fund typically has a mid-cap bias due to its factor weighting.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS. CLICK HERE TO VIEW WTV PROSPECTUS.
For definitions of terms in the table above, please visit the glossary.
Compared to the Russell 1000 Value, WTV is 10% over-weight in Consumer Discretionary with lesser over-weights in Energy (+3%) and Materials (+3%). The greatest under-weights are in Health Care (-6%), Consumer Staples (-4%), Real Estate (-3%) and Utilities (-3%).
The weighting process of the model behind WTV, which is based on shareholder yield, is a version of modified equal weighting. The largest weight in the Fund after the rebalance is less than 1%, making the Fund well-diversified across companies and sectors.
Unlike frequent rebalancing, which can lead to premature selling of winning positions, WTV has an annual rebalancing process, with smaller-scale changes made intra-year based on market conditions and investment opportunities.
At this year’s rebalance, the Fund sold one of its winners—Meta—after impressive trailing 12-month returns of nearly 200%.
Meta’s shareholder yield dropped significantly since November 20, 2022, falling from nearly 13% to less than 3%. In comparison to the S&P 500, Meta shifted from having a greater-than-3x shareholder yield to a below-market shareholder yield.
While there’s no perfect timing signal, using shareholder yield as a sell-discipline helps determine, quantitively, when to take profits off the table.
For investors who find themselves over-weight in the Magnificent Seven following a remarkable surge this year, WTV offers a diversified basket with zero exposure to those specific names.
Important Risks Related to this Article
For current Fund holdings, please click here. Holdings are subject to risk and change.
There are risks associated with investing, including the possible loss of principal. Funds focusing their investments on certain sectors increase their vulnerability to any single economic or regulatory development. This may result in greater share price volatility. While the Fund is actively managed, the Fund’s investment process is expected to be heavily dependent on quantitative models, and the models may not perform as intended. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.
Originally published 5 January 2024.
For more news, information, and analysis, visit the Modern Alpha Channel.
U.S. investors only: Click here to obtain a WisdomTree ETF prospectus which contains investment objectives, risks, charges, expenses, and other information; read and consider carefully before investing.
There are risks involved with investing, including possible loss of principal. Foreign investing involves currency, political and economic risk. Funds focusing on a single country, sector and/or funds that emphasize investments in smaller companies may experience greater price volatility. Investments in emerging markets, currency, fixed income and alternative investments include additional risks. Please see prospectus for discussion of risks.
Past performance is not indicative of future results. This material contains the opinions of the author, which are subject to change, and should not to be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product and it should not be relied on as such. There is no guarantee that any strategies discussed will work under all market conditions. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This material should not be relied upon as research or investment advice regarding any security in particular. The user of this information assumes the entire risk of any use made of the information provided herein. Neither WisdomTree nor its affiliates, nor Foreside Fund Services, LLC, or its affiliates provide tax or legal advice. Investors seeking tax or legal advice should consult their tax or legal advisor. Unless expressly stated otherwise the opinions, interpretations or findings expressed herein do not necessarily represent the views of WisdomTree or any of its affiliates.
The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or component of any financial instruments or products or indexes. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each entity involved in compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties. With respect to this information, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including loss profits) or any other damages (www.msci.com)
Jonathan Steinberg, Jeremy Schwartz, Rick Harper, Christopher Gannatti, Bradley Krom, Kevin Flanagan, Brendan Loftus, Joseph Tenaglia, Jeff Weniger, Matt Wagner, Alejandro Saltiel, Ryan Krystopowicz, Brian Manby, and Scott Welch are registered representatives of Foreside Fund Services, LLC.
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