Value stocks and related ETFs have been decent performers of late. They’ve been generating buzz for a group of equities that long trailed growth stocks. Enthusiasm for value could earnestly be reborn. If so, investors should take that as a reminder to be judicious regarding evaluating value ETFs.
Some ETFs, including the Invesco S&P 500 Pure Value ETF (RPV), focus on that concept, And that can benefit investors as highlighted by RPV beating the S&P 500 Value Index by a margin of better than 2-to-1 over the past year.
In a recent report on value ETFs, Bank of America Research highlighted the benefits of value purity. It assigned its top ETF ratings to four pure-value ETFs, including RPV. The $1.32 billion RPV follows the S&P 500 Pure Value Index. It debuted in March 2006.
Why Value Purity Matters
Many investors are drawn to value equities and ETFs based on the assumption they’re getting “a good deal.” What many don’t realize is that when applying standard value screens, some so-called value stocks also reside in growth indexes. That means those market participants could unknowingly be embracing more overlap than they realize.
“Some fund providers offer more targeted, ‘pure value’ baskets of stocks. In our view, a ‘pure value’ approach has 1. more exposure to stocks with the highest value scores; 2. less exposure to stocks with high growth scores; and 3. less overlap with the index universe being screened,” observef Bank of America.
