Top 3 value ETFs of 2022

Vanguard Value ETF (VTV)

A popular low-cost option for passive value investors is the Vanguard Value ETF (VTV), which tracks the CRSP US Large Cap Value Index. With 341 holdings, VTV is fairly diversified and falls into the "large-value" style box category. Most of the ETF is dominated by healthcare, financial, industrial, consumer staple, and energy sector companies. With an expense ratio of just 0.04%, the ETF is one of the cheapest value funds on the market. However, its exposure to value stocks isn't as robust as some of the others, as it seeks to track a benchmark as opposed to actively screening for value metrics.

Invesco Pure Value ETF (RPV)

Value investors looking for a quasi-actively managed ETF can consider RPV. This ETF screens for picks by assigning each stock in the S&P 500 two-style scores. For value, stocks are scored based on their price-to-book, price-to-earnings, and price-to-sales ratios. For growth, stocks are scored based on their three-year sales per share growth, the three-year ratio of earnings per share change to price per share, and momentum by a 12-month percentage change in price. The ratio between the value and growth score for each stock is calculated and rank ordered as deep value, blend, or deep growth. RPV will only select stocks ranked as deep value, with the higher-ranking ones weighted heavier. The ETF costs an expense ratio of 0.35%. 

Dimensional US Targeted Value ETF (DFAT)

Dimensional Fund Advisors (DFA) has a longstanding history of active factor investing, particularly when it comes to size and value stocks. In recent years, DFA released many of their longstanding mutual funds, previously only accessible through advisors in ETF form. DFAT targets value stocks by looking for low price-to-book, price-to-cash flow, and price-to-earnings ratios. DFAT also screens picks for robust profitability, which it defines as a company with high earnings or profits from operations in relation to its book value or assets. Finally, DFAT also implements short-term considerations for price momentum and conservative investment. The ETF has an expense ratio of 0.29%. 

Factor regression results

I conducted a factor regression of all three funds from July 2021 to the present (limited by DFAT's short history). In terms of loadings for value, RPV and DFAT scored the highest as expected. VTV's value loading was significantly lower. Interestingly, DFAT also had high loadings for size, thanks to its many mid-cap and small-cap stocks. This is another risk factor that has historically driven higher returns. 

Please note this article is for information purposes only and does not constitute investment advice.