VTV: Built For Passive Investors, This Value ETF Is A Top Performer

VTV: Built For Passive Investors, This Value ETF Is A Top Performer


VTV is a cost-efficient, well-diversified large-cap value ETF that’s tailor-made for passive investors. Its expense ratio is 0.04%, it yields 2.19%, and has low annual turnover.

VTV has also been the fourth-best performer in its category over the last five years. I’ll highlight periodic performances for 30 other large-cap value ETFs in this article.

I like VTV’s current setup, with Pharmaceuticals and Diversified Bank stocks totaling 13%. Bank stocks are great long-term holdings, but some are at risk due to the war in Ukraine.

VTV should be slightly less volatile than the market since its five-year beta is 0.95. However, solid growth opportunities exist in the Financials sector, and the 17.95 forward P/E is attractive.

Active investors could probably do better, and I’ll include some options that score well on my end. But if watching the markets has exhausted you lately, VTV is a nice choice for investors simply needing a break.

This idea was discussed in more depth with members of my private investing community, Hoya Capital Income Builder. Learn More »

GOCMEN/iStock via Getty Images Investment Thesis

The Vanguard Value ETF ( VTV ) is the cheapest large-cap value ETF on the market today, with a 0.04% expense ratio. Its top holding is Warren Buffett’s Berkshire Hathaway ( BRK.B ), and it has been the fourth-best performer in its category over the last five years. Along with its massive $86 billion in assets under management and low turnover rate, there are good reasons for its popularity, and I think it’s an excellent choice for passive investors who want to look away from the markets for a while.

This article will highlight VTV’s historical performance and the performances of 30 other large-cap value ETFs I track. You’ll see the benefits of its simplistic approach and realize that there are better choices available if you are willing to be more active in your approach. Overall, I expect the value segment of the market to outperform this year, and thus, VTV should too. However, I’m rating VTV as a hold today simply because of my knowledge of those better choices. I’ll present the information in an easy-to-understand format and hope it’s enough for you to decide whether VTV is worthy of your hard-earned cash. ETF Overview

Strategy and Fund Basics

VTV tracks the CRSP US Large Cap Value Index and launched on January 26, 2004, making it one of the most established large-cap value ETFs on the market today. CRSP Indexes are unique, and while I don’t wish to go into great detail on the intricacies of the construction method, it results in the inclusion of some mid-cap value stocks at smaller weights. It’s not anything worth discussing, though, since the 37 stocks that fall below S&P Dow Jones’ $13.1 billion minimum for large-cap stocks totals just 1.83% of ETF. CRSP Indexes are free float-adjusted capitalization-based Indexes, so that is why its top ten list includes companies you’re familiar with, like Berkshire Hathaway, Johnson & Johnson ( JNJ ), and Exxon Mobil ( XOM ).

What is worth discussing is that VTV isn’t a pure value ETF; it merely includes a certain percentage of stocks with the best value scores. While some investors want better-targeted exposure to pure value stocks, the advantage of this method is its appeal to a broader range of investors. Further, it’s less likely to underperform during growth-favored periods significantly. These features make it best suited for passive investors who want to market exposure with a bit of a value lean.

In calculating the value scores for each security, CRSP uses five factors: Book To Price Ratio

Future Earnings To Price Ratio

Historical Earnings To Price Ratio

Dividend To Price Ratio

Sales To Price Ratio

There’s nothing fancy here, though it’s worth mentioning that not all Indexes use future earnings to price as an input. I view it as an advantage, especially after volatile periods like we’ve had recently where past earnings may not indicate future earnings.Finally, here is a list of additional fund statistics for those wanting a quick snapshot of the fund. VTV’s expense ratio of 0.04% is the lowest available in its category, distributes a respectable 2.18% yield, and has grown dividends at an annual 8.45% rate over the last ten years. Current Price: $144.93 Assets Under Management: $86.17 billion Shares Outstanding: 687.42 million Expense Ratio: 0.04% Launch Date: January 26, 2004 Trailing Dividend Yield: 2.18% Five-Year Dividend CAGR: 6.79% Ten-Year Dividend CAGR: 8.45% Five-Year Beta: 0.98 Number of Securities: 350 Portfolio Turnover: 10.00% […]

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