Launched on 01/11/2018, the American Century U.S. Quality Value ETF (VALQ) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
VALQ is managed by American Century Investments, and this fund has amassed over $234.31 million, which makes it one of the larger ETFs in the Style Box - All Cap Value. This particular fund seeks to match the performance of the AMERICAN CENTURY U.S. QUALITY VALUE INDX before fees and expenses.
The American Century U.S. Quality Value Index seeks to select securities of large and mid-capitalization companies that are undervalued or have sustainable income.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.29% for VALQ, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.57%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 22.50% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Industrials and Consumer Staples round out the top three.
Taking into account individual holdings, Intl Business Machines Corp Common Stock Usd.2 (IBM) accounts for about 2.92% of the fund's total assets, followed by Procter + Gamble Co/the Common Stock (PG) and Johnson + Johnson Common Stock Usd1.0 (JNJ).
VALQ's top 10 holdings account for about 25.52% of its total assets under management.
Performance and Risk
The ETF return is roughly 18% so far this year and is up about 17.86% in the last one year (as of 12/30/2024). In the past 52-week period, it has traded between $52.40 and $64.64.
The fund has a beta of 0.95 and standard deviation of 14.86% for the trailing three-year period. With about 230 holdings, it effectively diversifies company-specific risk.
Alternatives
American Century U.S. Quality Value ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
Capital Group Dividend Value ETF (CGDV) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Capital Group Dividend Value ETF has $12.24 billion in assets, iShares Core S&P U.S. Value ETF has $19.73 billion. CGDV has an expense ratio of 0.33% and IUSV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Value.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>American Century U.S. Quality Value ETF (VALQ): ETF Research Reports
International Business Machines Corporation (IBM) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Procter & Gamble Company (The) (PG) : Free Stock Analysis Report
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
Capital Group Dividend Value ETF (CGDV): ETF Research Reports
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
