In this article, we will take a look at the top 10 deep value stocks ETFs. To see more such companies, go directly to Deep Value Stocks ETFs: Top 5 Picks.
The inflation storm that started in 2022 and subsequent rate hikes made value stocks relevant again. The massive comeback of value stocks after a long time proved that sticking to the basics and fundamentals in investing would always be in fashion. While the AI boom of 2023 caused tech growth stocks to outshine value this year, analysts are indicating that value is here to stay as inflation does not show signs of slowing down significantly and the Federal Reserve is more than ready to continue on its path of rate hikes, albeit with a brief pause. A Bloomberg report published on September 26 quoted Rob Arnott, founder of Research Affiliates, who said that the odds of hard landing are rising and inflation is expected to remain elevated in the short term. These factors, according to Arnott, make cheap and undervalued stocks more attractive. Arnott said that the “illusion” of cooling inflation this year caused growth stocks to surge. But time has proved that the Fed’s battle against inflation is far from being over and now the analyst expects growth stocks to reverse gains. The Bloomberg report also quoted an important data point which shows the outperformance of value stocks. Bloomberg Index data shows that “a strategy that goes long cheap stocks and short the opposite is set for its best month in nearly a year.”
A Perfect Time to Buy Value Stocks
Arnott thinks the outperformance of growth this year is an opportunity for long-term value investors. He reportedly said that this is the “perfect” time to pile into value plays because any news or report about the resurgence of inflation or recessionary fears would be enough to provide a boost to value stocks. Value stocks receded earlier this year and currently they are offering an even more discounted position for investors, according to the analyst.
However, Arnott is not happy about the Fed increasing interest rates. Instead, he is for decreasing interest rates and boosting the private sector to increase supply. Arnott said that the Fed does not need to increase interest rates to control inflation. He believes such steps are increasing the odds of recession or hard landing.
Perhaps the biggest reason why growth stocks outshined value this year is the AI boom that lifted stocks of a handful of major tech companies. These major companies account for a big chunk of stock market gains this year. But is investing in the current trends, say AI technology, is totally against value investing approach? Remember there was a time when Warren Buffett used to say he doesn’t like to invest in businesses he does not understand. Today you’ll find a lot of technology companies in his portfolio, including Apple, in which the Oracle of Omaha’s fund has a $177 billion stake as of the June quarter. An interesting research paper entitled “Value Investing During Past Years” talks about the importance of investing in latest trends as part of the broader value investing approach. The paper says
“…Value investing hasn't been successful for regular investors. Some may argue that this is not a representative sample and praise Warren Buffett's stock picks, but if we examine Berkshire Hathaway's stock portfolio, we can see that about half of it is invested in Apple, a stock that has been widely loved by the market in the past decade. It may not have been considered a value stock 4-5 years ago. Another example is Occidental Petroleum, which experienced a significant price movement when Buffett bought a large stake in the company. Buffett's trades have a similar impact on stock prices. This is not strange, good, or bad. Buffett is not just a random stock picker – he has the power to influence market expectations. So, we come to the second question of “Investing like a Buffet” part: is it rational to participate in a bubble? And there is an explanation, why yes, even on a risk-adjusted basis. Traditionally, risk in portfolio management is measured by volatility, which focuses on the potential for losing money. However, this approach only captures a limited aspect of risk and fails to account for the full range of potential outcomes. Not investing in an asset that eventually performs well is a missed opportunity and can lead to feelings of regret, which is a common emotional response to risk.”
For this article we scoured value investing platforms and stock screeners and chose 10 value ETFs that give investors exposure to deep value stocks for the long term. Most of these ETFs have posted strong gains over the past several years and they give exposure to major value stocks that are undervalued today. These ETFs give investors exposure to some of the best US companies including Apple Inc. (NASDAQ:AAPL), Meta Platforms, Inc. (NASDAQ:META) and JPMorgan Chase & Co. (NYSE:JPM).
The Acquirers Fund ETF (NYSEARCA:ZIG) is perhaps one of the most famous deep value ETFs. The Acquirers Fund ETF (NYSEARCA:ZIG), managed by Tobias Carlisle, invests in companies that it considers are undervalued but fundamentally strong. The Acquirers Fund ETF (NYSEARCA:ZIG) is advised by Acquirers Funds, LLC.
The Acquirers Fund ETF (NYSEARCA:ZIG) is up about 25% over the past five years.
Some top holdings of The Acquirers Fund ETF (NYSEARCA:ZIG) include Steel Dynamics, Inc. (NASDAQ:STLD), Cal-Maine Foods, Inc. (NASDAQ:CALM) and CF Industries Holdings, Inc. (NYSE:CF).
Major ETFs give investors exposure to top US stocks like Apple Inc. (NASDAQ:AAPL), Meta Platforms, Inc. (NASDAQ:META) and JPMorgan Chase & Co. (NYSE:JPM).
9. Avantis US Large Cap Value ETF (NYSEARCA:AVLV)
Avantis US Large Cap Value ETF (NYSEARCA:AVLV) invests in large-cap companies it believes have lower valuations and higher profitability ratios. Over the past one year Avantis US Large Cap Value ETF (NYSEARCA:AVLV) is up about 20%.
Among the top holdings of Avantis US Large Cap Value ETF (NYSEARCA:AVLV) are Apple Inc. (NASDAQ:AAPL), Meta Platforms, Inc. (NASDAQ:META) and JPMorgan Chase & Co. (NYSE:JPM).
As of the end of the second quarter of 2023, 135 out of the 910 hedge funds tracked by Insider Monkey were long Apple Inc. (NASDAQ:AAPL). Analysts and investors are watching Apple after the company launched its latest iPhone.
Morgan Stanley analyst Erik Woodring recently said that iPhone 15 lead times are touching record highs, which the analyst thinks is an encourage sign for Apple Inc. (NASDAQ:AAPL) investors.
8. Vanguard Small Cap Value Index Fund (NYSEARCA:VBR)
Vanguard Small Cap Value Index Fund (NYSEARCA:VBR) is a unique ETF that gives investors exposure to small-cap value stocks. Vanguard Small Cap Value Index Fund (NYSEARCA:VBR) seeks to track the performance of CRSP US Small Cap Value Index, which measures the investment return of small-capitalization value stocks.
Some of the biggest holdings of Vanguard Small Cap Value Index Fund (NYSEARCA:VBR) are Builders FirstSource Inc. (NASDAQ:BLDR), Bunge Ltd. (NYSE:BG) and IDEXX Laboratories, Inc. (NASDAQ:IDXX).
As of the end of the second quarter of 2023, 57 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Vanguard Small Cap Value Index Fund (NYSEARCA:VBR). The most significant stakeholder of the company during this period was John Smith Clark’s Southpoint Capital Advisors which owns a $218 million stake in the company.
Vanguard Small Cap Value Index Fund (NYSEARCA:VBR) is up about 14% over the past five years.
7. Invesco S&P 500 Pure Value ETF (NYSEARCA:RPV)
Invesco S&P 500 Pure Value ETF (NYSEARCA:RPV) tracks the S&P 500® Pure Value Index. Invesco S&P 500 Pure Value ETF (NYSEARCA:RPV) takes into account several metrics to make sure it invests in companies that are undervalued. These metrics and indicators include book-value-to-price ratio, earnings-to-price ratio, and sales-to-price ratio. Some of the top holdings of Invesco S&P 500 Pure Value ETF (NYSEARCA:RPV) are Citigroup Inc. (NYSE:C), Berkshire Hathaway Inc. (NYSE:BRK) and Capital One Financial Corporation (NYSE:COF).
Citigroup Inc. (NYSE:C) is one of the most undervalued bank stocks to buy according to hedge funds. Citigroup Inc. (NYSE:C)’s PE ratio as of September 26 is 6.51. As of the end of the second quarter of 2023, 75 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Citigroup Inc. (NYSE:C) as of the end of the second quarter. The biggest hedge fund stakeholder of Citigroup Inc. (NYSE:C) was Warren Buffett’s Berkshire Hathaway which owns a $2.5 billion stake in the company.
6. Vanguard Value Index Fund (NYSEARCA:VTV)
Passively managed value Vanguard Value Index Fund (NYSEARCA:VTV) ranks 6th in our list of the top deep value stocks ETFs to buy today. Vanguard Value Index Fund (NYSEARCA:VTV) tracks CRSP US Large Cap Value Index, which measures the investment return of large-capitalization value stocks.
Some of the top holdings of Vanguard Value Index Fund (NYSEARCA:VTV) are Berkshire Hathaway Inc. (NYSE:BRK), UnitedHealth Group Incorporated (NYSE:UNH) and Exxon Mobil Corporation (NYSE:XOM).
Exxon Mobil Corporation (NYSE:XOM) is one of the most attractive stocks since the company has a strong track record of dividend growth. As of the end of the second quarter of 2023, 71 hedge funds tracked by Insider Monkey reported owning stakes in Exxon Mobil Corporation (NYSE:XOM). The biggest stakeholder of Exxon Mobil Corporation (NYSE:XOM) during this period was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $1.4 billion stake in the company. Some other notable stocks that value and growth ETFs give exposure to these days include Apple Inc. (NASDAQ:AAPL), Meta Platforms, Inc. (NASDAQ:META) and JPMorgan Chase & Co. (NYSE:JPM).
