Best And Worst Q3 2018: Large Cap Value ETFs And Mutual Funds

by: David Trainer

Summary

The Large Cap Value style ranks first in Q3'18.

Based on an aggregation of ratings of 67 ETFs and 932 mutual funds.

PWV is our top-rated Large Cap Value ETF and LMBGX is our top-rated Large Cap Value mutual fund.

The Large Cap Value style ranks first out of the twelve fund styles as detailed in our Q3'18 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large Cap Value style ranked third. It gets our Very Attractive rating, which is based on an aggregation of ratings of 67 ETFs and 932 mutual funds in the Large Cap Value style. See a recap of our Q2'18 Style Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Large Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 18 to 908). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Large Cap Value style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund's holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings - Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Aptus Fortified Value ETF (BATS:FTVA) and American Century STOXX U.S. Quality Value ETF (NYSEARCA:VALQ) are excluded from Figure 1 because their total net assets (NYSEARCA:TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings - Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Invesco Dynamic Large Cap Value ETF (NYSE:PWV) is the top-rated Large Cap Value ETF and Brandywine Global Dynamic U.S. Large Cap Value Fund (MUTF:LMBGX) is the top-rated Large Cap Value mutual fund. Both earn a Very Attractive rating.

Oppenheimer S&P Ultra Dividend Revenue ETF (NYSEARCA:RDIV) is the worst rated Large Cap Value ETF and Integrity Energized Dividend Fund (MUTF:NRGDX) is the worst rated Large Cap Value mutual fund. RDIV earns a Neural rating and NRGDX earns a Very Unattractive rating.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund's performance is only as good as its holdings' performance. Don't just take our word for it, see what Barron's says on this matter.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Large Cap Value ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Funds

Sources: New Constructs, LLC and company filings

This article originally published on July 19, 2018.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

[1]Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2]Ernst & Young's recent white paper "Getting ROIC Right" proves the superiority of our holdings research and analytics.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.