Could the near to medium term finally see value ETFs take the starring role back from growth? Value indices have provided some steady returns this year, but the question is, can they accelerate into the new year? Economic headwinds and concentration risk for the AI hyperscalers could see value stocks outperform. The American Century U.S. Quality Value ETF (VALQ) presents a strong candidate to do well if value stocks do.
Key Takeaways:
- As concentration risk looms from expensive tech stocks, value offers an appeal.
- Headwinds like rising rates may also deter growth stocks from performing.
- VALQ offers a multifactor solution to the value ETF slot in portfolios.
According to YCharts data, the S&P 500 P/E Ratio Forward Estimate sat at 21.08 for Q3 this year. Meanwhile, some of the largest firms, the AI hyperscalers, sit at rich valuations themselves, also seeing some notable concentration risk. That handful of names is driving almost 40% of S&P 500 movement.
The value ETF provides a strong opportunity if value stocks gain on a relative basis. VALQ charges a 29 basis point fee to track the American Century U.S. Quality Value Index. The value ETF looks for undervalued large-caps that beat peers based on fundamental research metrics. That includes value, income, and quality-related metrics.
The strategy has between 30-80% of its portfolio in value, with 20-65% in income-generating stocks. Its multifactor approach helps it isolate the best-valued opportunities among durable, long-tenured large-cap firms.
