VOOV ETF: Value takes a breather but remains attractive in the long term (NYSEARCA:VOOV)

Value significantly outperformed growth from late 2021 to early last year. However, shortly after ChatGPT launched, the style roles reversed. Over the past nearly 18 months, the rally in growth stocks versus value has been something special. Especially now in There is a sense in the markets that value cannot take off on its own, but if you look a little closer, you will see that this factor has led to higher returns in the past. In addition, the valuation gap between value and growth is large, although unattractive cyclical stocks and blue chips have been under pressure for several years.

I repeat a buy recommendation for the ETF shares of the Vanguard S&P 500 Value Index Fund (NYSEARCA:VOOV). The large fund has delivered a solid total return of 21% since my last analysis in April 2023.

Value stocks compared to growth stocks have been on a downward trend since the beginning of 2023

Value historical Exceeds growth

Weak value vs. growth – rolling returns

According to the Exhibitorthe Vanguard S&P 500 Value ETF invests in stocks of the S&P 500 Value Index, which is comprised of the value companies in the S&P 500. The fund focuses on closely replicating the return of the index, which is considered a benchmark for total returns in U.S. value stocks. VOOV’s low costs and high tradability make it a solid choice for long-term investors looking to gain exposure to the large-cap value factor. The ETF has a higher yield than many growth funds, allowing long-term investors to use it strategically in terms of investment positioning.

VOOV is a large ETF with nearly $5 billion in assets under management as of June 21, 2024. That is 50% more than my previous assessment, so inflows have been positive and there has been some price appreciation as well. VOOV offers a modest 0.10% annual expense ratioand the current Dividend yield is currently 1.72% above the S&P 500. Price dynamics has been robust over the past year, but I’ll address some technical concerns later in the article.

The value portfolio is taken into account low risk in analyzing historical standard deviation trends and taking into account diversified allocation. Liquidity ratios are also excellent – ​​the average daily volume is not high at just 78,000 shares, but the average bid/ask spread over the last 30 days is reasonable at just four basis points, according to Vanguard.

If we take a closer look at the portfolio, the Morningstar 4-star Silver rated ETF is shown in the top left of the style box as expected. The fund’s price-to-earnings ratio is slightly lower than it was in Q2 2023, while its long-term EPS growth rate has dropped to just 8.5%, resulting in a median PEG ratio of close to 2.0. Potential investors need to be aware that there is indeed significant mid-cap exposure at VOOV based on Morningstar’s cap classification parameters.

VOOV: Portfolio and factor profiles

Unlike the S&P 500, information technology is not a big theme. Financials is the largest sector at 22%, with IT being very significantly underweight compared to the SPX at 22 percentage points. So expect VOOV to trade more heavily based on interest rate expectations and investors’ view of macroeconomic developments. And the more fascination there is with AI in the collective market psyche, the more VOOV could lose out to its growth counterpart, the Vanguard S&P 500 Growth Index Fund (VOOG).

VOOV: Investments and dividend information

Seasonally, we are in for a strong month if history is anything to go by. July has averaged a gain of 2.3% over the last 10 years, 90% of the time. However, the last two months of the third quarter saw volatility.

VOOV: Strong seasonal trends in July

The technical view

With a reasonable valuation and exposure to the cyclical side of the U.S. economy, VOOV’s chart is generally encouraging, but there are some risks that need to be pointed out. In the chart below, notice that the RSI momentum oscillator has weakened at the top of the chart. Price is consolidating while the broader market has made new highs, suggesting relative underperformance for 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 $170 – the April low – while resistance is evident given a bearish double top pattern in the $180-$181 range from early 2024.

Overall, the main trend is bullish, but the uptrend continues to consolidate.

VOOV: A pause in the uptrend as far as RSI trends are concerned

The conclusion

I reiterate my Buy recommendation on VOOV. I see that the Value portfolio still has value in terms of its P/E and PEG ratios, while the fund is in a clear uptrend, albeit with a multi-month pause.