Investors late to the value party don’t always need to fret. Value action may just be getting started, indicating it’s not too late to examine the already hot Invesco S&P 500® Pure Value ETF (RPV ) . RPV follows the S&P 500® Pure Value Index.
Source: With Value Springing Back to Life, Put ‘RPV’ on Your Radar
The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.
Interestingly, value is still cheap relative to growth.
“Furthermore, the projected earnings growth for value stocks is expected to outpace growth stock earnings by 700 basis points in 2021 and 400 basis points in 2022,” writes Invesco’s Kevin Holt.
The Value Comeback
Value funds are often loaded with cyclical stocks, which pertains to RPV too. That’s working for now, but investors shouldn’t expect a straight line higher.
“The value resurgence starting in September 2020 is so notable. That said, we don’t expect the economic recovery to be linear,” adds Holt. “We anticipate that there will be periods of fits and starts as uncertainty leads to clarity, and that markets may go through periods of consolidation, which may provide additional value opportunities. Looking ahead, there may be a time when more economically sensitive stocks give way to stable and defensive stocks that are negatively correlated to a higher rate environment.”
Still, RPV isn’t solely reliant on cyclical stocks. Investors digging a little deeper will discover why value investing was once viewed as timeless and essential.
“Given that, it’s important to note that our approach is dynamic,” says Holt. “There’s a common perception that value investing is strictly about cyclical sectors, but that’s not the case. At its core, value investing is about looking at the cash flows of a company and using all the information at hand to put a value on that company. I don’t love particular sectors — I love discounted cash flows. So, as the defensive/stable areas of the market become more compelling to us, we will look to opportunistically increase exposure.”
RPV is up 26.88% year-to-date after hitting a new 52-week high on April 29.
For more news, information, and strategy, visit the ETF Education Channel.
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.
Enjoyed this article? Sign up for our newsletter to receive regular insights and stay connected.