1 ETF to help you hedge your portfolio in Q4

1 ETF to help you hedge your portfolio in Q4

With recession fears looming, investors could add the Vanguard Value Index Fund (VTV) to their portfolio as a hedge due to its less volatile nature. The ETF invests in fundamentally sound large-cap companies with recession-proof companies available at reduced valuation. Read more….



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The stock market had a difficult year, with major indices posting significant declines. Uncertain macroeconomic and geopolitical concerns have significantly weakened investor sentiment this year.

The underperformance of major equity indices means that many fundamentally sound stocks are available at a reduced valuation. Minutes from the Federal Reserve’s policy meeting earlier this month released yesterday showed that the central bank would slow the current pace of rate hikes. This should bode well for quality stocks.

Inflation eased slightly in October. Even though the Fed may slow the current pace of rate hikes, the final rate of interest rates could be higher than initially expected. This should trigger a recession next year.

Therefore, investors can protect their portfolios against the economic downturn by adding the Vanguard Value Index Fund (VTV). The Vanguard Group, Inc, manages VTV. The fund invests in shares of companies operating in diversified sectors. It invests in large-cap value stocks. The discovery seeks to track the performance of the CRSE US Large Cap Value Index.

In an investor note, BofA said: “We found that seasonality appears to benefit value factors. Interestingly, value funds also seem to benefit, as historically 43% of value funds have outperformed their benchmark between November and January. compared to 36% of core funds and 39% of growth funds.

VTV should do well due to its exposure to large-cap value stocks. These companies tend to be in resilient sectors and trade at a discount to their peers. Plus, its strong dividend payouts make it an attractive investment.

The ETF has gained 9.9% in price over the past month and 0.6% over the past year to close the latest trading session at $144.69.

Here are the factors that make VTV a solid investment now:

Fund statistics

VTV has $103.99 billion in assets under management. Its spend rate of 0.04% is significantly lower than the industry average of 0.49%. Over the past three months, the fund has had a net inflow of $591.02 million. It has a beta of 0.91 and a NAV of $144.63 as of November 23, 2022.

Main titles

The fund has a total of 343 holdings. Its major holdings include UnitedHealth Group Incorporated (A H), with a weight of 3.08%, followed by Berkshire Hathaway Inc. (BRK.B), with a weight of 3.04%, and Exxon Mobil Corporation (XOM), with 2.74%.

Attractive dividend

VTV’s dividend payouts have grown at a CAGR of 6.6% over the past three years and at a CAGR of 6.4% over the past five years. Its four-year average dividend yield is 2.52%. VTV pays an annual dividend of $3.39, which yields 2.35% over the prevailing share price.

POWR ratings reflect promising outlook

VTV’s strong fundamentals are reflected in its POWR Rankings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

VTV has an A for Trade and Buy & Hold and a B for Peer grade. It is ranked first out of 86 ETFs in category A Large Cap Value ETFs Category.

See All the Other Best ETFs in Large Cap Value ETFs here.

Conclusion

VTV is trading above its 50-day and 200-day moving averages of $133.18 and $138.73, respectively, indicating an upward trend. Given the likelihood of a recession hitting the economy next year, investors might consider adding VTV.

Given its exposure to cheap, fundamentally sound and resilient companies and reliable dividend payouts, it could be a strong hedge against the recession.

How the Vanguard Value Index Fund (VTV) compares to its peers

VTV has an overall POWR rating of A, which equates to a Strong Buy rating. Check out these other ETFs within the group of large-cap value ETFs with A (strong buy) ratings: iShares Russell 1000 Value ETF (IWD), Vanguard High Dividend Yield Index Fund (VYM) and Schwab US Dividend Equity ETF (SCHD).


Shares of VTV were unchanged in premarket trading on Thursday. Year-to-date, VTV has gained 0.18%, versus a -14.29% rise in the benchmark S&P 500 over the same period.


About the Author: Dipanjan Banchur

Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets.

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