VOOV ETF: Value Taking A Breather, But Remains Attractive Long Term (NYSEARCA:VOOV)

mizoula Value outperformed growth sharply from late 2021 through early last year. The style roles reversed, however, shortly after the launch of ChatGPT. Over the past nearly 18 months, the rally in growth shares compared to value has been something to behold. Right now in markets, it feels like value cannot get itself off the mat, but zooming out, we find that this factor has historically provided superior returns. Moreover, amidst a multi-year drubbing of non-sexy cyclicals and blue chips, the valuation gap between value and growth is historically big. I reiterate a buy rating on the Vanguard S&P 500 Value Index Fund ETF Shares (NYSEARCA:VOOV). The large fund has produced a solid 21% total return since I last analyzed it back in April of 2023. Value Trending Lower vs Growth Stocks Since Early 2023 Stockcharts.com Value Historically Outperforms Growth BofA Global Research Weak Value vs Growth Rolling Returns BofA Global Research According to the issuer, the Vanguard S&P 500 Value ETF invests in stocks in the S&P 500 Value Index, composed of the value companies in the S&P 500. The fund focuses on closely tracking the index’s return, which is considered a gauge of overall U.S. value stock returns. VOOV is a solid choice for long-term investors seeking exposure to the large-cap value factor given its low cost and high tradeability. The ETF sports a higher yield than many growth funds, so long-term investors can use it strategically with respect to asset location. VOOV is a large ETF with nearly $5 billion in assets under management as of June 21, 2024. That’s up 50% from my previous assessment, so flows have been positive along with some price appreciation. VOOV features a modest 0.10% annual expense ratio, and the current dividend yield is above that of the S&P 500 at 1.72% currently. Share-price momentum has been robust in the last year, but I will note some technical concerns later in the article. The value portfolio is considered low risk when analyzing its historical standard deviation trends and when considering its diversified allocation. Liquidity metrics are likewise sublime – average daily volume is not high, though, at just 78,000 shares but its 30-day median bid/ask spread is reasonable at just four basis points, per Vanguard. Digging into the portfolio, the 4-star, Silver-rated ETF by Morningstar plots in the top-left of the style box, as we’d expect. The fund’s price-to-earnings ratio is a touch lower than it was in Q2 2023 while its long-term EPS growth rate has inched lower to just 8.5%, resulting in a mid-range PEG ratio close to 2.0. Prospective investors need to realize that there’s actually significant mid-cap exposure with VOOV based on Morningstar’s cap classification parameters. VOOV: Portfolio & Factor Profiles Morningstar Unlike the S&P 500, Information Technology is not a high weight. Financials at 22% is the largest sector position, with I.T. being a very significant 22-percentage-point underweight compared to the SPX. So, expect VOOV to trade more based on interest rate expectations and where investors see the macroeconomy heading. Furthermore, the more AI intrigue there is across the collective market psyche, the more VOOV may lose out to its growth counterpart, the Vanguard S&P 500 Growth Index Fund (VOOG). VOOV: Holdings & Dividend Information Seeking Alpha Seasonally, a strong month is on tap if history is a guide. July has featured an average gain of 2.3% in the last 10 years, up 90% of the time. Volatility has struck over the latter two months of Q3, though. VOOV: Strong July Seasonal Trends Seeking Alpha The Technical Take With a reasonable valuation and exposure to the cyclical side of the US economy, VOOV’s chart is generally encouraging, but there are some risks to point out. Notice in the graph below that there has been a weakening in the RSI momentum oscillator at the top of the chart. Price is consolidating while the broader market has been hitting new highs, indicating relative performance weakness with VOOV compared to the SPX. But the ETF has a rising long-term 200-day moving average and is in an uptrend after hitting a multi-year low in October 2022. I see support at the $170 mark – the nadir from April – while resistance is apparent given a bearish double-top pattern at the $180 to $181 range from earlier in 2024. Overall, the primary trend is with the bulls, but the uptrend continues to consolidate. VOOV: A Pause in the Uptrend, Concerning RSI Trends Stockcharts.com The Bottom Line I reiterate a buy rating on VOOV. I see the value portfolio has still a value in terms of its P/E and PEG ratios while the fund is in a clear uptrend, albeit with a multi-month pause ongoing.

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