The Top 5 Value ETFs of 2016

Value exchange-traded fund (ETFs) provided exceptional returns in 2016. We selected the top 5 value ETFs based on year-to-date returns as of December 11, 2016. No large-cap ETFs made the list. Mid-cap and small-cap ETFs dominated, thanks to healthy returns that ranged from 35.04% to 40.96%.Value investing focuses on finding undervalued stocks that have potential for growth. This potential is determined by examining the fundamentals of the company and comparing the firm to other businesses that have similar fundamentals. (See also: Value Investing Is Back, But Is It Sustainable?)

The most famous value investor is Warren Buffet. He has inspired many investors to take a value approach in selecting stocks. Value ETFs allow an investor to buy numerous value stocks all at once. (See also: Warren Buffett’s Investing Style Reviewed.)

All of these ETFs have a very tight focus. That focus has nothing to do with any particular industry and everything to do with equities that the market has overlooked or unfairly devalued. The funds limit their selections further by considering the size of the companies involved, whether mid-cap or small-cap.

Despite the focus, all of these ETFs may, from time to time, invest in securities outside of the indices they follow. Money managers do this to maintain the risk and return profile of their portfolios so that they more closely match that of the indexes.

Guggenheim S&P SmallCap 600 PureVal ETF (RZV)

This is the closest an investor can get to a pure value play in ETFs. The stocks are selected from the S&P SmallCap 600 Pure Value Index. Out of that index, the fund selects stocks that have value characteristics.

  • Avg. Volume: 28,379
  • Net Assets: $234.56 million
  • Yield: 0.56%
  • YTD Return: 30.59%
  • Expense Ratio: 0.35%
  • Inception Date: March 1, 2006
  • Since Inception: 6.80%

PowerShares Russell 2000 Pure Value Portfolio (PXSV)

This is another small-cap ETF, focusing on the Russell 2000. These are the smallest companies of the Russell index. The idea here is to capture growth from up-and-coming companies that often experience their most explosive growth in their early years.

  • Avg. Volume: 11,759
  • Net Assets: $72.9 million
  • Yield: 1.94%
  • YTD Return: 28.75%
  • Expense Ratio: 0.39%
  • Inception Date: March 3, 2005
  • Since Inception: 6.64%

ProShares Russell 2000 Dividend Growers (SMDV)

SMDV emphasizes small companies that are growing their dividends. It can contain as few as 40 stocks. The fund strives to spread the stocks it owns across all market sectors.

  • Avg. Volume: 72,759
  • Net Assets: $277.32 million
  • Yield: 1.40%
  • YTD Return: 29.20%
  • Expense Ratio: 0.40%
  • Inception Date: February 3, 2015
  • Since Inception: 24.86%

Guggenheim S&P MidCap 400 Pure Value ETF (RFV)

RFV has an even tighter focus on mid-cap value stocks than RZV, selecting stocks from the S&P MidCap 400 Pure Value Index.

  • Avg. Volume: 25,645
  • Net Assets: $189.74 million
  • Yield: 1.10%
  • YTD Return: 29.86%
  • Expense Ratio: 0.35%
  • Inception Date: March 1, 2006
  • Since Inception: 7.77%

SPDR S&P 600 Small Cap Value ETF (SLYV)

This ETF gives investors exposure to the S&P while focusing on value investing. SLYV maintains all of its assets in S&P 600 securities, though it may invest as little as 80% of assets in those securities.

  • Avg. Volume: 59,535
  • Net Assets: $730.05 million
  • Yield: 1.30%
  • YTD Return: 27.39%
  • Expense Ratio (net): 0.15%
  • Inception Date: September 25, 2000
  • Since Inception: 8.40%

The Bottom Line

Equities of large-cap companies can be value stocks, but the market tends to treat big firms more fairly and is less likely to overlook them. Smaller companies often fly under the radar, and their stocks can suffer because many investors just don’t pay attention to them. That makes them a value play. The ETFs on this list search for these companies. Individual investors get the protection of owning several value stocks. If one fails, another may outperform, thus maintaining the average return for the ETF portfolio.