In this piece, we will take a look at the 12 best large cap value ETFs. If you want to jump to the top five ETFs and skip out the details about large cap companies, then check out 5 Best Large-Cap Value ETFs.
Large cap stocks are some of the most widely traded on the market. Even though mega cap firms take the most attention in the media, large caps are important companies that often have thousands of employees and numerous suppliers that depend on them for a stable flow of orders. Additionally, their business footprint is also greater than other stocks such as mid cap stocks and small cap stocks. Consequently, these firms can also have an international presence, which provides both benefits and drawbacks when the viability of an investment decision is considered.
These stocks are also more resilient to adverse economic conditions, as their shares, depending on the business model of the firm, are often viewed as a source of stability. Large cap stocks often have adequate cash reserves that enable them to keep the business functional even as revenue drops, leaving them better off in a weak economy when compared to small cap firms which are typically less resilient. However, the higher share prices, and the fact that the stocks post lower losses, also limit their growth in an economic recovery which is typically a time of optimism that sees major stock indexes rise in their value.
Right now, investor attention in the stock market is focused on a mix of local and international factors. America has led the world when it comes to economic robustness, and news from China suggests that the economy might be starting to recover as the Communist Party steps into action and introduces reforms to stimulate activity. The second half of 2023 has seen the U.S. dollar erase all losses that it posted after the banking crisis in March, and a strong reason behind this appreciation has been weak global economic data that has brought back risk aversion to investors’ minds.
At the same time, a rise in global oil prices in the wake of supply cuts is also generating fears that global central banks, including the Federal Reserve, will be forced to keep a close eye on inflation readings for longer. Purchaser, or upstream supply chain prices, are on the rise in the U.S., and their effects on the broader consumer price index can lead to either high interest rates for longer or even additional rate hikes depending on what the data shows.
The strength of large cap stocks and their robust and viable business models are apparent when we consider the stocks that are part of the Dow Jones Industrial Average (DJIA). The Dow is one of the oldest stock market indexes in the market, and its constituents, which are typically limited to 30 companies, are called blue chip stocks. This title is an allusion to their value and 15 out of the 30 companies part of the DJIA can be considered large cap stocks ‘proper’. There are two ways to classify a large cap stock, and one definition narrows down the market capitalization to sit between $10 billion and $200 billion, while the other classifies any company with a market capitalization greater than $10 billion as a large cap stock.
Within a broader investment framework, the concept of value is quite popular in the industry and among investors. A value stock is one that is believed to be trading at less than what its fundamentals would indicate. These stocks attract investors due to the potential of a share price appreciation since the underlying business model is capable of growing its market share and revenue in the future. There are several metrics that measure a stock’s value. Two of these are the price to earnings and price to sales ratios. They compared the share price of a firm with its ability to generate sales or generate profit and we’ve extensively covered both of these. For more details on the topic, you should check out 12 Best High Risk High Reward Stocks To Buy Now and 10 Oversold Growth Stocks To Buy. And if you want to learn about value stocks irrespective of their market capitalization, then take a look at 10 Oversold Value Stocks To Buy.
Today, we’ll look at some exchange traded funds (ETFs) that invest in large cap and value stocks. Some top ETF picks in this piece, based on their performance, are Schwab Fundamental U.S. Large Company Index ETF (NYSE:FNDX), First Trust Rising Dividend Achievers ETF (NASDAQ:RDVY), and Schwab U.S. Dividend Equity ETF (NYSE:SCHD).
Our Methodology
To compile our list of the best large cap value ETFs, we first compiled a list of the 25 largest large cap value ETFs as classified by Morningstar Financial. Then, their five year average daily returns were calculated, and the ETFs with returns greater than 8% were selected as part of our list of the best large cap value ETFs.
12 Best Large-Cap Value ETFs
12. iShares MSCI USA Value Factor ETF (BATS:VLUE)
5 Year Returns: 8.21%
iShares MSCI USA Value Factor ETF (BATS:VLUE) is a $6.55 billion exchange traded fund that was set up in 2013. More than 99% of its portfolio is invested in stocks. It focuses its attention on investing in stocks that are part of an index of U.S. mid and large cap firms. 30% of the ETF is invested in technology stocks, and if we add healthcare and financial services into the mix, then more than half of the portfolio is accounted for. The iShares MSCI USA Value Factor ETF (BATS:VLUE)’s biggest investments are in Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO), and AT&T Inc. (NYSE:T).
Along with First Trust Rising Dividend Achievers ETF (NASDAQ:RDVY), Schwab Fundamental U.S. Large Company Index ETF (NYSE:FNDX), and Schwab U.S. Dividend Equity ETF (NYSE:SCHD), iShares MSCI USA Value Factor ETF (BATS:VLUE) is a great large cap value ETF.
11. Vanguard Mega Cap Value Index Fund (NYSE:MGV)
5 Year Returns: 8.31%
Vanguard Mega Cap Value Index Fund (NYSE:MGV) is another sizeable mid cap value ETF. The fund has net assets of $6.2 billion and it was set up in 2007. It is part of the Vanguard fund family and has spread most of its portfolio across firms in the financial services, healthcare, and industrial sectors. The Vanguard Mega Cap Value Index Fund (NYSE:MGV) tracks the CRSP US Mega Cap Value Index and it is a passively managed fund.
10. ProShares S&P 500 Dividend Aristocrats ETF (BATS:NOBL)
5 Year Returns: 8.84%
The ProShares S&P 500 Dividend Aristocrats ETF (BATS:NOBL) is the largest large cap value ETF on our list so far since it has $11.6 billion in net assets. The fund was set up in 2013 and it is part of the ProShares fund family. As the title suggests, the exchange traded fund limits its attention only to stocks that are part of the S&P500 Dividend Aristocrat index – a collection of stocks that have grown their dividends each year consistently for decades.
9. Invesco FTSE RAFI US 1000 ETF (NYSE:PRF)
5 Year Returns: 9.01%
The Invesco FTSE RAFI US 1000 ETF (NYSE:PRF) is another sizeable large cap value ETF. It is part of the Invesco fund family and has $6.12 billion in net assets. It tracks the FTSE RAFI US 1000 index which uses several indicators of value and financial stability to include stocks. These include a firm’s dividends, its sales, its book value, and other metrics. Some top holdings of the Invesco FTSE RAFI US 1000 ETF (NYSE:PRF) are Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Berkshire Hathaway Inc. (NYSE:BRK-B).
8. iShares Core S&P U.S. Value ETF (NASDAQ:IUSV)
5 Year Returns: 9.12%
iShares Core S&P U.S. Value ETF (NASDAQ:IUSV) is one of the oldest funds on our list since it was set up in 2000. It has $14 billion in net assets and is part of the iShares fund family. Financial services and technology stocks account for more than a third of the ETF’s holdings. Its benchmark index is the S&P 900 Value Index, and the fund has invested in 702 companies. The price to book ratio of the iShares Core S&P U.S. Value ETF (NASDAQ:IUSV) is 2.62, with notable investments being Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN).
7. iShares S&P 500 Value ETF (NYSE:IVE)
5 Year Returns: 9.14%
The iShares S&P 500 Value ETF (NYSE:IVE) has a whopping $25 billion in net assets. It was set up in 200 and its NAV of $162.99 closely tracks the ETF’s share price in the market. The ETF has invested in 402 companies and its benchmark index is the S&P500 Value Index. Mega cap stocks dominate the holdings of the iShares S&P 500 Value ETF (NYSE:IVE), and sector wise, its biggest investments are in financial services, technology, and industrials.
6. Vanguard S&P 500 Value Index Fund (NYSE:VOOV)
5 Year Returns: 9.23%
Vanguard S&P 500 Value Index Fund (NYSE:VOOV) is another fund part of the Vanguard fund family. It is a modestly sized fund in terms of net assets when we look at some of the heavy hitters on our list. The ETF has net assets of $3.74 billion and its NAV is $157.46, two cents lower than the current market price. As the title suggests, the Vanguard S&P 500 Value Index Fund (NYSE:VOOV) tracks the S&P500 Value Index, with the top stock picks being Microsoft and Meta Platforms, Inc. (NASDAQ:META).
Schwab Fundamental U.S. Large Company Index ETF (NYSE:FNDX), Vanguard S&P 500 Value Index Fund (NYSE:VOOV), First Trust Rising Dividend Achievers ETF (NASDAQ:RDVY), and Schwab U.S. Dividend Equity ETF (NYSE:SCHD) are some top large cap value ETFs.
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Disclosure: None. 12 Best Large-Cap Value ETFs is originally published on Insider Monkey.
