There’s a simple reason for choosing value investing.
It works.
There have been plenty of studies that show stocks with low price-to-earnings or price-to-book value ratios do tend to outperform over time.
One easy way for investors to get access to a group of value stocks is to buy an ETF. The two largest value ETFs in Canada are the iShares Canadian Value Index ETF (TSX:XVD) and the First Asset Morningstar Canada Value Index ETF (TSX:FXM).
The First Asset Value ETF is small, with just $140 million in assets and fewer than 10,000 shares trading in an average day. It has a management fee of 0.6%, and pays a trailing distribution yield of 2.1%.
The ETF has a concentrated portfolio, with 30 names. Top holdings include Air Canada, Magna International, and Pengrowth Energy, with 4.3%, 3.6%, and 3.6% of assets, respectively.
The iShares Value ETF has some advantages over its competitor, including a slightly lower management fee of 0.5%. But it is also smaller than the First Value ETF, with only $66 million in net assets. It also does less volume on a daily basis.
The portfolio has 59 different holdings, with Royal Bank accounting for more than 10% of assets. Bank of Nova Scotia is next with 8.5%, and Suncor Energy is third with 6.1%. Most top holdings are large-caps, while the First Asset offering has more of a mid-cap feel.
