Value Is Not Dead


At times of ‘free’ money, all growth seems unlimited. When that money becomes scarce, growth is re-evaluated.

We’ll likely see lower prices during the summer before any recovery materializes. After all, we have been seeing heightened volatility and stock declines but the current price/earnings ratios for the US markets are still high, particularly if profits deteriorate.

Value companies are trading at reasonable prices and finally, it is time to bet on a factor that has been under-loved for the last 10 years.

Value is not dead, it has just been put to sleep by easy money.

There are several ways of betting on value. This week Master Investor is looking at the simplest of all − buying broad-based ETFs. One good option is the Vanguard Russell 1000 Value ETF (NASDAQ: $VONV). Another option is the Vanguard Value ETF (NYSEARCA: $VTV).

The most popular is $VTV because it is much larger, holding $145 billion in assets compared to $VONV, holding ‘just’ $9 billion. $VTV is also one of the cheapest options in the market with ongoing fees of just 0.04%. The fees for $VONV are not a deal-breaker at a still-low 0.08% (despite being double VTV’s fees). An investment of $10,000 would see $4 and $8 paid in fees annually, respectively.

Choosing between them is a matter of personal preference. If you prefer a fund that is more concentrated on the biggest market caps, then $VTV is your best option. For a less concentrated bet and on a lower average market cap, $VONV has the edge.

In any case, the top five holdings are the same for both funds, even if in different proportions. The funds’ performance has been similar over the years, with $VTV gaining some advantage when markets decline.



Source: Master Investor by Filipe R. Costa

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Luka Marjanovic


As Partner at Internet Bull Report, Luka brings deep expertise in Capital Markets, Financial Marketing, and Strategic Communications to his work advising clients. He is passionate about exceptional client service and devising transformational strategies that enable unrivaled performance. Luka holds a Bachelor’s in International Business and a Master’s in International Management. Over the years he has worked with organizations across a wide range of industries, playing a lead role in defining and delivering the strategy and direction of new and existing business operations. Prior to his business education, he studied biology-and-biotechnology and served in the Danish Royal Army as Second Sergeant; leading and managing a group under extreme pressure and conditions. Luka has spent significant time abroad, living and working in seven different countries. When he's not in the office, he's chasing the next gusts windsurfing, carving the mountain snowboarding, or out in the forest for a jog.