Beat Market With Top-Ranked Value ETFs & Stocks

The U.S. stock market is expected to see huge volatility and heavy trading this week given the referendum on U.K.’s membership in the European Union (EU) to be held on June 23. This is especially true as the weekend polls suggest that chances of Britain remaining in the European Union have increased.

An opinion poll by Survation for the newspaper The Mail on Sunday showed that 45% wanted to remain in EU and 42% are in favor of leaving. Another poll conducted by a YouGov/Sunday Times revealed that chances of Britain exiting the EU has dropped from 46% to 43% while that of staying increased to 44% from 43%. However, chances of Britain exiting the European bloc is still a concern for investors that could lead to worldwide economic instability and chaos in the stock markets (read: Market Fears Brexit: Volatility ETFs Take Full Advantage).

Additionally, uneven domestic growth, weak corporate earnings, Fed’s policy uncertainty, sluggishness in emerging markets and global growth fears added to the worries. In fact, both the World Bank and the International Monetary Fund (IMF) have slashed their global growth forecast for the second time for this year. The World Bank now expects global growth of 2.4% versus 2.9% expected earlier due to sluggish growth in advanced economies, stubbornly low commodity prices, weak trade and diminishing capital flows while the IMF lowered the projection to 3.2% from 3.4%.

Amid these uncertainties, value investing appears safe and appealing to investors. The strategy includes stocks with strong fundamentals – earnings, dividends, book value and cash flow – that trade below their intrinsic value and are undervalued by the market.

Why Value Investing?

Value stocks often overreact to both positive and negative news, resulting in share price movement that does not reflect the company’s true long-term fundamentals. This creates buying opportunities in such stocks at depressed prices and shows the potential for capital appreciation when the stock finally reflects its true market price.

As a result, value stocks have the potential to deliver higher returns and exhibit lower volatility compared to growth and blend counterparts. In fact, these stocks outperform the growth ones across all asset classes when considered on a long-term investment horizon and are less susceptible to trending markets (read: Don't Fear Market Woes: Profit from These ETFs).

Given this, investors may want to consider a nice value play in the current volatile market environment. For them, we have presented four ETFs and stocks that have easily crushed the market from a year-to-date look and are likely to continue their outperformance in the days ahead.

ETF Picks

Using our database, we have selected value ETFs that provide exposure to the broad stock market instead of a particular sector and have a Zacks Rank #1 (Strong Buy) or 2 (Buy) with a decent level of AUM of above $50 million. This is because these ranks suggest strengthening fundamentals and superior weighting methodologies that could allow them to move higher than their cousins in a booming market (read: all the Top Ranked ETFs).

Guggenheim S&P MidCap 400 Pure Value ETF RFV

This fund provides pure exposure to the mid cap value segment of the U.S. equity market by tracking the S&P MidCap 400 Pure Value Index.

Zacks ETF Rank: #1
Expense Ratio: 0.35%
AUM: $121.6 million
No. of Stocks: 98
YTD Return: 9.75%

Vanguard Small-Cap Value ETF VBR

This fund targets the U.S. small cap segment and follows the CRSP US Small Cap Value Index.

Zacks ETF Rank: #2
Expense Ratio: 0.08%
AUM: $7.3 billion
No. of Stocks: 856
YTD Return: 6.5%

PowerShares Dynamic Large Cap Value Portfolio PWV

This fund tracks the Dynamic Large Cap Value Intellidex Index, which seeks to provide capital appreciation while maintaining value exposure. The index applies a 10-factor style isolation process and then evaluates stocks on price momentum, earnings momentum, quality and management action (read: 7 Top Market-Beating Dividend ETFs to Buy Now).

Zacks ETF Rank: #1
Expense Ratio: 0.57%
AUM: $994.1 million
No. of Stocks: 50
YTD Return: 4.73%

Vanguard Value ETF (HN:VTV)

This fund seeks to track the CRSP US Large Cap Value Index, which measures the performance of the largest U.S. value stocks.

Zacks ETF Rank: #2
Expense Ratio: 0.08%
AUM: $21.9 billion
No. of Stocks: 316
YTD Return: 3.87%

Stock Picks

For stocks, we have chosen four top picks using the Zacks Screener that fits our five criteria: a Zacks Rank #1 or #2, a Value Style Score of ‘A’, Zacks Industry Rank within the top 10%, market cap of over 1 billion, and positive relative price change (compared to the S&P 500). Our chosen stocks are:

Trinseo SA (NYSE:TSE)

This Pennsylvania-based company is a global materials company and manufacturer of plastics, latex and rubber in Europe, the Middle East, North America, Latin America, and the Asia Pacific.

Zacks Rank: #1
Zacks Industry Rank: Top 6%
Market Cap: $2.20 billion
Relative Price Change: 61.81

Whirlpool Corp. (NYSE:WHR)

This Michigan-based company is the manufacturer and marketer of home appliances and related products worldwide (read: ETFs & Stocks to Buy from Top Ranked Sectors for Summer).

Zacks Rank: #2
Zacks Industry Rank: Top 1%
Market Cap: $13.34 billion
Relative Price Change: 16.82

Vishay Intertechnology Inc. (NYSE:VSH)

This Malvern-based company is a leading international manufacturer and supplier of discrete passive electronic components and discrete active electronic components, particularly resistors, capacitors, inductors, diodes and transistors.

Zacks Rank: #2
Zacks Industry Rank: Top 3%
Market Cap: $1.93 billion
Relative Price Change: 6.61

Multi-Color Corp. (NASDAQ:LABL)

This Ohio-based company is one of the largest producers of printed labels for branded consumer products in the United States.

Zacks Rank: #2
Zacks Industry Rank: Top 3%
Market Cap: $1.01 billion
Relative Price Change: 1.40

Bottom Line

Value ETFs and stocks generally outperform during periods of muted market performance as we are currently seeing. As such, investors shouldn’t forget the value space and should take a closer look at a few of the attractive value ETFs in this segment for excellent exposure and some outperformance in the months to come.


WHIRLPOOL CORP (WHR): Free Stock Analysis Report

TRINSEO SA (TSE): Free Stock Analysis Report

MULTI-COLOR (LABL): Free Stock Analysis Report

VISHAY INTERTEC (VSH): Free Stock Analysis Report

PWRSH-DYN LC VL (PWV): ETF Research Reports

VIPERS-VALUE (VTV): ETF Research Reports

VIPERS-SC VALUE (VBR): ETF Research Reports

GUGG-SP 400 PV (RFV): ETF Research Reports

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Zacks Investment Research