Making its debut on 09/22/2014, smart beta exchange traded fund Deep Value ETF (DVP) provides investors broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Exchange Traded Concepts. DVP has been able to amass assets over $262.16 M, making it one of the average sized ETFs in the Style Box - Large Cap Value. DVP, before fees and expenses, seeks to match the performance of the TWM Deep Value Index.
TWM Deep Value Index is constructed using an objective, rules-based methodology that begins with an initial universe that mirrors the companies listed on the S&P 500 Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.59% for this ETF, which makes it one of the more expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.55%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
DVP's heaviest allocation is in the Consumer Discretionary sector, which is about 39.30% of the portfolio. Its Information Technology and Materials round out the top three.
Taking into account individual holdings, Viacom Inc New (VIAB) accounts for about 8.07% of the fund's total assets, followed by Gap Inc (GPS) and Cvs Health Corp (CVS).
The top 10 holdings account for about 59.44% of total assets under management.
Performance and Risk
The ETF return is roughly 8.98% and is down about -3.46% so far this year and in the past one year (as of 02/18/2019), respectively. DVP has traded between $28.82 and $37.21 during this last 52-week period.
DVP has a beta of 1.08 and standard deviation of 17.69% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 21 holdings, it has more concentrated exposure than peers.
Deep Value ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $38.16 B in assets, Vanguard Value ETF has $46.14 B. IWD has an expense ratio of 0.20% and VTV charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center .
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Deep Value ETF (DVP): ETF Research Reports
Viacom Inc. (VIAB): Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
The Gap, Inc. (GPS): Free Stock Analysis Report
CVS Health Corporation (CVS): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.