Is the Vanguard Value (VTV) ETF a buy as the rally stalls?

on May 28, 2024
  • The Vanguard Value ETF has soared to its highest level on record.
  • It has joined other popular ETFs like QQQ and SPY in the strong bull run.
  • The fund could see some short-term volatility as it formed a double-top pattern.

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The Vanguard Value ETF (VTV) has soared to a record high as American equities continued their strong bull run. Its total return this year has jumped to over 7.5%, which is better than other comparable ETFs like the Schwab US Dividend Equity (SCHD) and the iShares Core Dividend Growth (DGRO).

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Good ETF for value investors

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The Vanguard Value ETF is one of the biggest ETFs in the US with over $163 billion in assets under management. Its popularity is mostly because of its strong annual returns and low fees since it has an expense ratio of just 0.04%.

While it has trailed popular ETFs like the SPDR S&P 500 (SPY) and the Invesco QQQ (QQQ) ETFs, it has a long track record of performance. For example, it has had negative annual returns in five years since its inception in 2005. 

Its best year was in 2013 when it generated 33% annual return followed by 2021, 2019, and 2006 when its returns stood at 26.5%, 26.5%, and 22.3%, respectively. Its worst year was during the Global Financial Crisis when it lost over 35% of its value in 2008.

The VTV ETF tracks the CRSP US Large Cap Value Index, which looks at large-cap companies that trade at a lower valuation metric compared to the broader market. As a result, on average, its PE ratio of 18 is usually lower than the S&P 500 index’s 23.

VTV is a highly diversified fund, with financials, health care, and industrials being the biggest constituents. The other big parts of the fund are companies in the technology, energy, and consumer staples industry.

The biggest firms in the index are companies like Berkshire Hathaway, Broadcom, JPMorgan, Exxon Mobil, UnitedHealth, and Procter & Gamble. These are firms that dominate their respective industries, with Berkshire being a leading insurer and investment group in the US. 

JPMorgan is the biggest bank in the US while Exxon is the leading oil and gas company in the western world. UnitedHealth is the biggest health insurer while P&G is a consumer staples company whose products are used by millions of customers globally.

I believe that the VTV is a good ETF to invest in for investors holding mainstream funds like SPY and QQQ. The latter two funds are highly exposed to big technology companies like Microsoft, Apple, and Nvidia. As such, investing in VTV can help you to diversify your holdings.

VTV ETF stock analysis

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VTV chart by TradingView

Turning to the weekly chart, we see that the Vanguard Value ETF stock has been in a strong bull run for a long time. As a result, it has constantly remained above all moving averages, which is a positive thing since it signals that bulls are in control.

Recently, however, the stock has formed a small double-top pattern, which is a popular bearish sign. Therefore, I suspect some volatility in the coming weeks unless the bulls push it above the resistance point at $163.16. In the long term, however, the fund will continue generating strong returns. Besides, it has a five-star MorningStar rating and above-average ratings on people and process.

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