Even with the market at near all-time highs, some exchange-traded funds (ETFs) are solid choices for value investors.
As of February 17th, the S&P 500 has remained relatively flat over the past year. At first glance, it might seem disappointing, but that’s not the whole story.
While larger growth stocks have taken a hit, other sectors—like consumer staples, energy, industrials, and materials—are seeing gains. In fact, if you treat each company in the S&P 500 equally rather than by market cap, the index shows a 5.5% increase year-to-date.
Here are three value-oriented ETFs that could outperform the S&P 500 by 2026 and might still be worth buying today.
1. Vanguard Value ETF
The Vanguard Value ETF, with an impressive net worth of $227 billion, is the largest value-focused ETF in the world. This scale allows Vanguard to keep its expense ratio at just 0.03%, or $3 per $10,000 invested.
The top holdings of this fund aren’t the usual technology giants like Nvidia or Apple. Instead, there’s a strong emphasis on financials, industrials, and healthcare, which represent 53.1% of the ETF.
Among its top components are significant players such as JP Morgan Chase, Berkshire Hathaway, Exxon Mobil, Johnson & Johnson, and Walmart. While they may lack the flashiness of AI stocks, these companies have historically provided reliable returns and increased dividends. As a result, the Vanguard Value ETF has a yield of 2%, compared to the S&P 500’s 1.2%.
Although it’s not as cheap as it once was, partly due to stock price increases, it still trades at a price-to-earnings ratio of 21.7, which is higher than the S&P 500’s multiple.
2. Vanguard Mega Cap Value ETF
The Vanguard Mega Cap Value ETF is a more concentrated variant of its Value ETF sibling, carrying a slightly higher expense ratio of 0.05%. It holds 312 stocks, compared to the 123 in the regular Value ETF.
While the holdings are similar, the Mega Cap Value ETF gives more weight to larger companies. It invests 16.1% in the top five stocks—JPMorgan Chase, Berkshire Hathaway, Exxon Mobil, Johnson & Johnson, and Walmart—versus 13.1% in the standard Value ETF.
This ETF is a smart option for those wanting more exposure to leading value stocks without casting too wide a net. Over five years, its performance edged out that of the standard Value ETF slightly, with 89.1% total return compared to 85.5%. But honestly, the difference is minimal, so it boils down to what fits better with your investment goals.
3. Vanguard High Dividend Yield ETF
Then there’s the Vanguard High Dividend Yield ETF, which has gained 8.1% year-to-date—definitely a nice uptick.
This fund, which includes 562 holdings and has a modest expense ratio of 0.04%, focuses on companies typically known for their growing dividends. Though, it’s worth noting some quirks here.
Take Broadcom, the fund’s largest holding. It used to be seen as a value stock, but now its AI segment has really taken off. Nonetheless, it has a 15-year history of substantial dividend growth. The yield is only 0.8%, which seems less “high yield” than the name might suggest, and Walmart’s similar situation yields just 0.7% despite a 52-year consecutive increase in dividends due to high stock valuations.
This ETF doesn’t ditch blue-chip stocks just because their prices have risen, aligning more with long-term, strategic investments.
Overall, the Vanguard High Dividend Yield ETF shares similarities with both the Value and Mega Cap Value ETFs. It does tend to lean more toward lower-yield, high-growth sectors like tech and consumer discretionary, yet it’s slightly higher yielding at 2.3% while maintaining comparable valuations.
Broad exposure to top value stocks
The Vanguard Value, Mega Cap Value, and High Dividend Yield ETFs are closely related. For most investors, there’s a legitimate question about which one is currently the best option. While considering long-term holdings, it’s important to ensure you’re making an informed decision.
If you’re looking for more diversification, the Vanguard Value ETF could be the best pick. Alternatively, the Mega Cap Value ETF would serve those aiming to concentrate on big value stocks.
On the other hand, the Vanguard High Dividend Yield ETF includes some high-yield, lower-quality stocks but still features a 7% weight in Broadcom, adding an interesting growth perspective to a value-based fund. So, if you want a bit of AI exposure along with steady income, this might be the fund for you.
