Invest in Value with This Fund

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The Fidelity Value Factor ETF (FVAL) is an open-ended fund that focuses on value investing.

The fund’s objective is to provide returns that reflect the performance of stocks of large- and mid-cap U.S. companies that have attractive valuations. By definition, investors who engage in value investing seek out stocks that trade for less than their intrinsic values or, put more simply, stocks that are undervalued.

To do this, FVAL screens the 1,000 largest U.S. stocks to see if they meet four factors: high free-cash-flow yield, low enterprise value to EBITDA (earnings before interest, taxes, appreciation and amortization), low price-to-tangible-book value and low price-to-future earnings.

The fund’s expense ratio is 0.29%, which is in line with other value-oriented exchange-traded funds (ETFs) on the market. FVAL’s price-to-earnings (PE) ratio is below 16, while S&P 500 has a PE ratio of 25.33. Since the PE ratio is a measure of how much one is willing to pay for each dollar of earnings, these numbers mean that FVAL trades at a significant discount to the S&P 500.

Year to date, FVAL has returned 3.43%. The fund’s one-year return is 17.76%.

Chart courtesy of

FVAL’s top five holdings are Apple (APPL), 4.32%; Microsoft (MSFT), 3.53%; Alphabet (GOOGL), 3.04%; Facebook (FB), 2.27%; and JPMogran Chase & Co (1.97%).

FVAL is 25.73% invested in the information technology sector, 14.16% in financials, 13.51% in health care, 12.77% in consumer discretionary and 10.16% in industrials. The heavy weighting in technology represents a departure from traditional value ETFs, which typically assign their largest sector weight to financials.

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For investors who are seeking a fund with potentially undervalued holdings, the Fidelity Value Factor ETF (FVAL) could be well worth looking into for purchase.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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