Value stocks — those that are cheap in relation to earnings and other fundamental measures — have lagged growth stocks since 2008. But that pattern may be reversing. In the first quarter of 2016, Standard & Poor’s 500 Value index climbed 2.2%, while the S&P 500 Growth index lost 0.5%.
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In the interest of getting the best bargain on bargain stocks, we looked for low-fee exchange-traded funds that specialize in value stocks. For example, Schwab U.S. Large-Cap Value ETF (symbol SCHV), the lowest-cost ETF that focuses on large, undervalued firms, charges only 0.06% in annual fees. Microsoft, ExxonMobil and Johnson & Johnson top the list of its more than 300 holdings.
If you want to focus on cheap midsize companies, consider Vanguard Mid-Cap Value ETF (VOE), which charges 0.09% per year. It holds more than 200 stocks, with a median market capitalization of $9.6 billion. Top holdings at last word were Tyson Foods, ConAgra Foods and WEC Energy Group, formerly known as Wisconsin Energy.
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Prefer to bet on the little guys? Columnist James K. Glassman calls small-cap value stocks "the single best sector for investors right now" in the June 2016 issue of Kiplinger's Personal Finance magazine. He recommends iShares S&P Small-Cap 600 Value ETF (IJS), an index fund loaded with small-cap bargains. Among its holdings is Sanderson Farms, a poultry processor that's one of Glassman's longtime favorites.
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