Best And Worst Q2 2020: Large Cap Value ETFs And Mutual Funds
Summary
- The Large Cap Value style ranks first in Q2'20.
- Based on an aggregation of ratings of 69 ETFs and 834 mutual funds in the Large Cap Value style.
- SCHD is our top-rated Large Cap Value style ETF and STRAX is our top-rated Large Cap Value style mutual fund.
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The Large Cap Value style ranks first out of the twelve fund styles as detailed in our Q2'20 Style Ratings For ETFs And Mutual Funds report. Last quarter, the Large Cap Value style ranked second. It gets our Very Attractive rating, which is based on an aggregation of ratings of 69 ETFs and 834 mutual funds in the Large Cap Value style. See a recap of our Q1'20 Style Ratings here.
Figures 1 and 2 show the 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 14 to 804). This variation creates drastically different investment implications and, therefore, ratings.
Investors seeking exposure to the Large Cap Value style should buy one of the Very Attractive rated ETFs or mutual funds from Figures 1 and 2.
Figure 1: ETFs with the Best & Worst Ratings
* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.
Sources: New Constructs, LLC and company filings
Listed Funds Source Dividend Opportunity ETF, Cambria Shareholder Yield ETF (SYLD), and iShares Factors U.S. Value Style ETF (STLV) are excluded from Figure 1 because their total net assets (TNAs) 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
Stock Dividend Fund, Inc. (SDIVX) is excluded from Figure 2 because its total net assets (TNAs) are below $100 million and do not meet our liquidity minimums.
Schwab U.S. Dividend Equity ETF (SCHD) is the top-rated Large Cap Value ETF and Sterling Capital Behavioral Large Cap Value Equity Fund (STRAX) is the top-rated Large Cap Value mutual fund. Both earn a Very Attractive.
RiverFront Dynamic U.S. Dividend Advantage ETF (RFDA) is the worst-rated Large Cap Value ETF and Mutual Fund Series Catalyst Enhanced Core Fund (OIPAX) is the worst-rated Large Cap Value mutual fund. RFDA earns a Neutral rating and OIPAX 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.
Performance of Holdings = Performance of Fund
Analyzing each holding within funds is no small task. We perform this diligence with scale. 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
Our Robo-Analyst technology empowers our ETF and mutual fund rating methodology, which leverages our analysis of each fund’s holdings.
This article originally published on April 24, 2020.
Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.
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