Invest in Value with This Fund

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 Stockcharts.com

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.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.