5 Top Performing Value ETFs in 2024

Value-focused exchange-traded funds are becoming increasingly attractive as growth stocks, once the darlings of the market, face potential headwinds from a slowing economy and stubborn inflation in the second half of 2024. 

Through the first half of 2024, the biggest value stock ETFs, such as the Vanguard Value ETF (VTV), have lagged the growth-driven S&P 500 index, but a handful of actively managed value funds are beating the broad market benchmark. 

Will this be the year that value stocks finally outshine growth?

We highlight the top-performing value ETFs and dive into the key factors shaping the outlook for this classic investment strategy in 2024.  

What Are Value Stocks?

Value stocks are shares of companies that appear to be trading for a lower price than their actual worth. Imagine them as undervalued gems in the stock market. Investors who focus on value stocks believe that the market has overlooked these companies, and their stock price will eventually rise to reflect their true value. 

Here are some key characteristics of value stocks: 

• Trading below fundamental metrics: Value stocks often trade at a lower price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, or other valuation metrics compared to the broader market or their growth counterparts. 
• Established companies: Value stocks are typically found in mature industries with companies that have a history of profitability and stable cash flows. These companies may not be experiencing high growth rates, but they offer a degree of stability and potentially a reliable dividend stream. 
• Out-of-favor sectors: Value stocks can sometimes be found in sectors that are currently out of favor with investors. This could be due to temporary economic headwinds or a shift in investor sentiment. 

When Is the Best Time to Invest in Value Stocks?

While there’s no perfect time to invest in value stocks, and predicting the market with certainty is impossible, some general factors can suggest when value stocks might be a more attractive investment: 

• Defensive positioning: During uncertain economic periods or when there are concerns about a potential market downturn, value stocks can offer a more defensive investment approach. Many value stocks are found in sectors such as consumer staples, utilities, and healthcare, which tend to be less sensitive to economic cycles and provide steady earnings and dividends. 
• Relative valuation opportunities: When value stocks are trading at historically low valuations relative to the overall market or growth stocks, it may indicate a buying opportunity as prices reach attractive entry points for long-term investors.  
• Market corrections or bear markets: During these periods, fundamentally sound companies may become undervalued due to broader market pessimism. Savvy investors can identify and buy these stocks at a discount, positioning themselves for potential gains when the market rebounds.  

Best Value ETFs by 2024 Performance

Data as of June 30, 2024. Past performance is no guarantee of future performance.

Fidelity Fundamental Large Cap Core ETF

The Fidelity Fundamental Large Cap Core ETF (FFLC), formerly the Fidelity New Millennium ETF (FMIL), is an actively managed ETF that provides long-term capital growth by investing in large-cap core companies through an active fundamental selection process. 

• YTD gain: 20.62% 
• Expense Ratio: 0.38% 
• Assets under management: $350.7 million 

AB US High Dividend ETF

The AB US High Dividend ETF (HIDV) is an actively managed ETF that targets high dividend yields and long-term growth potential by investing in a selection of large and mid-cap U.S. companies. 

• YTD gain: 16.41% 
• Expense Ratio: 0.45% 
• Assets under management: $13.5 million 

Putnam Focused Large Cap Value ETF

The Putnam Focused Large Cap Value ETF (PVAL) is a non-transparent actively managed fund that uses fundamental metrics to target large-cap value stocks, and some midcaps, for capital growth and current income. 

• YTD gain: 15.83% 
• Expense Ratio: 0.56% 
• Assets under management: $666.9 million 

PGIM Jennison Focused Value ETF

The PGIM Jennison Focused Value ETF (PJFV) offers actively managed exposure to a concentrated portfolio of value stocks around the world. 

• YTD gain: 14.66% 
• Expense Ratio: 0.75% 
• Assets under management: $14.5 million 

ETC 6 Meridian Mega Cap Equity ETF

The ETC 6 Meridian Mega Cap Equity ETF (SIXA) is an actively managed fund that seeks capital appreciation by focusing on high-quality, large-capitalization stocks in the Russell 3000 Index through a quantitative strategy. 

• YTD gain: 14.06% 
• Expense Ratio: 0.78% 
• Assets under management: $246.9 million 

Benefits and Risks of Value Stocks

Here are some of the potential benefits of investing in value stocks and the ETFs that invest in them: 

• Capital appreciation: Value investors aim to buy stocks at a discount and profit when the market recognizes their true value, causing the price to rise. 
• Dividend income: Value stocks often pay out dividends, which can provide a steady stream of income for investors. 
• Lower volatility: Value stocks tend to be less volatile than growth stocks, which can make them a good option for investors seeking a more stable portfolio. 

However, value investing also comes with some risks:  

• Market inefficiencies may not be corrected: There's no guarantee that the market will recognize the true value of a company, and the stock price may not rise as anticipated. 
• Slower growth: Value stocks may not experience the same level of growth as growth stocks, potentially limiting overall returns. 
• Out-of-favor sectors may stay out of favor: If a sector is out of favor for a long time, it can drag down the performance of value stocks. 

Bottom Line on Value Stocks and ETFs

Value ETFs can be a smart way for investors to gain low-cost, diversified exposure to a range of value stocks. Overall, value investing can be a good strategy for investors seeking undervalued companies with the potential for long-term growth and income.  

Thus, value investing is a long-term investment strategy, and investors should not expect immediate returns when investing in value stocks or value ETFs. Long-term investors are wise to diversify a portfolio to include growth stocks and other consider other asset classes to manage risk.