If there is one investment factor that is drawing plenty of attention this year it is the value factor. Adulation and attention for the value factor is deserved. After a multi-year stretch in which it lagged growth, momentum and other investment factors, value is back with a vengeance.
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That much is confirmed by the iShares S&P 500 Value Index (ETF) (IVE), one of the benchmark value ETFs. The $9.6 billion iShares S&P 500 Value ETF is up 1.5 percent year-to-date compared to a paltry 0.2 percent gain for the S&P 500.
The Strength Of Value
Benzinga forecast the resurgence of the value factor and the relevant exchange-traded funds. That resurgence has been on display this year as investors are eschewing growth and momentum for value. Investors should consider boosting exposure to the value factor now before it gets too hot and they chase value when it is no longer offering, well, value.
There is a strong case for long-term investors to be value investors. According to BlackRock data, a $10,000 investment in value in 1979 was worth $566,000 at the end of last year.
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We believe the recent overallocation to and performance strength in momentum and growth sets the stage for investor rebalancing. While the long-term path to value outperformance is not a straight line, and may be marked by alternating spates of value and growth leadership, we fully expect that investors are going to want and need to re-allocate back to value in their portfolio, according to a BlackRock note.
Allocation And Holdings
Data suggest investors are already revisiting the value factor, as IVE has added more than $446 million in new assets this year. As is the case with several of its rivals, IVE will need the energy and financial services sectors to perform well because those groups combine for 36.5 percent of IVE's weight. Including Exxon Mobil Corporation (XOM) and Wells Fargo & Co (WFC), six of IVE's top 10 holdings are energy or financial services names.
There is another reason to consider the value factor right now: Value often performs well after it has lagged for a while.
Some of the periods of greatest value underperformance are followed by some of the most significant periods of outperformance. While the timing is impossible to predict, its not too great a leap to suggest we may be setting up for a rotation in favor of value stocks, added BlackRock.
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