Over the past month, investors are rotating into the deep value ETFs from 2011. Many poor performing ETFs in 2011 are now seeing double-digit price gains due to this changing trend. Defining deep value with a price to book less than 1 identifies the current ETFs with a combined deep value of stocks. The two most sought after sectors by investors has been financials and real estate. Among this universe of ETFs, the banking and financial ETFs are showing the greatest price gains through the previous month.
The SPDR S&P BANK ETF KBE employs a replication strategy in seeking to track the performance of the S&P Banks Select Industry Index. It has a price to book ratio of 0.79 with a dividend yield of 1.73%. Among its top ten holdings are Suntrust Banks STI and BB&T BBT, both of which are being highly touted by stock pickers for 2012. KBE is up 14.5% in the last month.
The ISHARES DOW JONES US REGIONAL BANKS IAT seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Select Regional Banks Index. It is loaded with regional banks such as US Bancorp (USB), PNC (PNC), BBT, STI, Fifth Third Bancorp (FITB) and many other regional banks. It has a price to book ratio of 0.93 with a dividend yield of 1.8%. IAT is up 13.9% in the last month.
SPDR S&P REGIONAL BANKING ETF KRE is similar to IAT by focusing on the S&P Regional Banks Select Industry Index. It has a price to book ratio of 0.94 with a dividend yield of 1.67%. KRE is up 13.5% in the last month.
The ISHARES DOW JONES US FINANCIAL SERVICES IYG is a broader ETF that focuses across the financial sector by including the big banks, credit card processers, investment services and some regional banks. Its top holdings include Visa (V), MasterCard (MA), American Express (AXP), Wells Fargo (WFC), JP morgan (JPM), Citigroup (C), BofA (BAC), Goldman (GS), and PNC. It has a price to book ratio of 0.85 with a dividend yield of 1.1%. IYG is up 11.4% in the last month.
The deep value real estate ETFs have not had as much of an increase in price over the last month compared to the finance/banking ETFs but some have beaten the S&P 4.98% return in this period. Most notable is the WISDOMTREE GLOBAL EX-US REAL ESTATE FUND DRW that employs a "passive management" or index investment approach designed to track the performance of the WisdomTree Global ex-US Real Estate Index. DRW sports a hefty 13.37% dividend yield that is very enticing to the income seekers. It has a price to book ratio of 0.86 and is up 7.26% in the last month.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.