ETFs
Should the Vanguard Small-Cap Value ETF (VBR) be on your investment radar?
If you are interested in broad exposure to the Small Cap Value segment of the U.S. stock market, look no further than the Vanguard Small-Cap Value ETF (VBR), a passively managed exchange-traded fund launched on 01/26/2004.
The fund is sponsored by Vanguard. It has accumulated assets of more than $27.25 billion, making it the largest ETF attempting to match the Small Cap Value segment of the U.S. stock market.
Why choose Small Cap Value
With a market capitalization of less than $2 billion, small-cap companies tend to be high-potential stocks relative to their large- and mid-cap counterparts, but carry higher risk.
Along with below-average price-to-earnings and price-to-book ratios, value stocks also have below-average sales and earnings growth rates. When it comes to long-term performance, value stocks have outperformed growth stocks in nearly every market; however, they are more likely to underperform growth stocks in strong bull markets.
Costs
Expense ratios are an important factor in an ETF’s performance, and over the long term, cheaper funds can significantly outperform their more expensive counterparts, all else being equal.
The annual operating expenses of this ETF are 0.07%, making it one of the cheapest products in the sector.
Its 12-month rolling dividend yield is 2.21%.
Sector exposure and main holdings
While ETFs offer diversified exposure that minimizes the risk associated with any one stock, investors should also look at the fund’s actual holdings. Fortunately, most ETFs are highly transparent products that disclose their holdings daily.
This ETF is primarily dedicated to the industrial sector, representing approximately 22.60% of the portfolio. The financial and consumer discretionary sectors round out the top three.
Looking at individual holdings, Builders Firstsource Inc (BLDR) represents about 0.73% of total assets, followed by Booz Allen Hamilton Holding Corp (BAH) and Carlisle Cos Inc (CSL).
Performance and risk
The objective of the VBR is to match the performance of the CRSP US Small Cap Value Index before fees and expenses. The CRSP US Small Cap Value Index measures the investment performance of small-cap stocks.
The ETF has gained about 1.23% year-to-date and is up about 12.01% over the past year (as of 7/10/2024). Over the past 52 weeks, it has traded between $149.18 and $191.88.
The ETF has a beta of 1.14 and a standard deviation of 20.10% over the past three years, making it a medium-risk pick in this sector. With around 859 stocks, it effectively diversifies company-specific risk.
Alternatives
Vanguard Small-Cap Value ETF is rated 3 (Hold) by Zacks ETF, which is based on the asset class’s expected return, expense ratio and momentum, among other factors. Thus, VBR is a good option for those seeking exposure to the Style Box – Small Cap Value sector of the market. Investors may also want to consider other ETF options in this space.
The story continues
The iShares Russell 2000 Value ETF (IWN) and the Avantis US Small Cap Value ETF (AVUV) track a similar index. While the iShares Russell 2000 Value ETF has $11.22 billion in assets, the Avantis US Small Cap Value ETF has $11.31 billion. The IWN ETF has an expense ratio of 0.24% and the AVUV charges 0.25%.
Conclusion
Passively managed ETFs are increasingly popular among institutional and retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long-term investors.
To learn more about this and other ETFs, find products that match your investment goals, and read articles on the latest developments in the ETF investment universe, visit Zacks ETF Center.
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Vanguard Small-Cap Value ETF (VBR): ETF Research Reports
Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report
Carlisle Companies Incorporated (CSL): Free Stock Analysis Report
Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report
iShares Russell 2000 Value ETF (IWN): ETF Research Reports
Avantis US Small Cap Value ETF (AVUV): ETF Research Reports