Are Active ETFs On the Up as the Value Freeze Finally Thaws?

Until the last several months of 2020, value stocks had languished. The situation is finally improving, bringing with it better things for certain actively managed ETFs like the Fidelity Blue Chip Value ETF (FBCV) . 

Source: Are Active ETFs On the Up as the Value Freeze Finally Thaws?

FBCV will normally invest primarily in equity securities of companies that the Adviser believes are undervalued in the marketplace in relation to factors such as assets, sales, earnings, growth potential, or cash flow, or in relation to securities of other companies in the same industry (stocks of these companies are often called “value” stocks).The Adviser normally invests at least 80% of the fund’s assets in blue chip companies (companies that, in FMR’s view, are well-known, well-established, and well-capitalized), which generally have large or medium market capitalizations.

“After a long, dark, cold winter, green shoots have emerged across the landscape of systematic value strategies–those that buy stocks that are cheap relative to some fundamental measure of their worth,” writes Ben Johnson for Morningstar. “Exactly what has plagued these approaches for so long has been widely debated. And while the recent thaw has been welcomed by many long-suffering value disciples, even some of the factor’s biggest fans worry that it may be a false spring.”

A Fine Time for ‘FBCV’?

Value’s resurgence is being led by financial services stocks, among other cyclical sectors. As an actively managed fund, FBCV can better-capitalize on those sector-level opportunities than many passive rivals.

“Favorable stock exposure in the financials, industrials, and information technology sectors explain much of the value benchmark’s outperformance over this stretch,” said Johnson of the Russell 3000 Value Index. “Top stock contributors include a number of names that stand to benefit from the gradual reopening of the global economy following a year that saw most of the world locked down.”

While FBCV’s holdings aren’t revealed daily, the fund’s methodology is straightforward and readily accessible to investors.

“Investing in companies that FMR believes are undervalued in the marketplace in relation to factors such as assets, sales, earnings, growth potential, or cash flow, or in relation to securities of other companies in the same industry (stocks of these companies are often called ‘value’ stocks),” according to Fidelity.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.