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Dipanjan Banchur

1 ETF to Help You Hedge Your Portfolio in Q4

The stock market has had a challenging year, with the major indexes witnessing significant declines. The uncertain macroeconomic and geopolitical concerns have significantly dampened investor sentiment this year.

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

Inflation eased slightly in October. Although the Fed might be slowing down the current pace of rate hikes, the final rate of interest rates could be higher than initially predicted. This is expected to trigger a recession next year.

Therefore, investors can hedge their portfolios against the economic downturn by adding Vanguard Value Index Fund (VTV). The Vanguard Group, Inc, manages VTV. The fund invests in stocks of companies operating across diversified sectors. It invests in large-cap value stocks. The find 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 appear to benefit, as historically, 43% of value funds outperformed their benchmark during Nov.-Jan. vs. 36% of core funds and 39% of growth funds.”

VTV is expected to do well due to its exposure to large-cap value stocks. These companies generally belong to resilient sectors and are trading at a discount to their peers. Moreover, its solid 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 last trading session at $144.69.

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

Fund Stats

VTV has $103.99 billion in assets under management. Its expense ratio of 0.04% is significantly lower than the industry average of 0.49%. Over the past three months, the fund witnessed 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.

Top Holdings

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

Attractive Dividend

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

POWR Ratings Reflect Promising Prospects

VTV’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The 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 the A-rated Large Cap Value ETFs category.

View all the other top ETFs in the Large Cap Value ETFs here.

Bottom Line

VTV is trading above its 50-day and 200-day moving averages of $133.18 and $138.73, respectively, indicating an uptrend. Given the likelihood of a recession hitting the economy next year, investors could look to add VTV.

Given its exposure to cheap, fundamentally strong, resilient businesses and reliable dividend payments, it could be a solid hedge against recession.

How Does Vanguard Value Index Fund (VTV) Stack up Against Its Peers

VTV has an overall POWR Rating of A, which equates to a Strong Buy rating. Check out these other ETFs within the Large Cap Value ETFs group with A (Strong Buy) ratings: iShares Russell 1000 Value ETF (IWD), Vanguard High Dividend Yield Index Fund (VYM), and Schwab U.S. Dividend Equity ETF (SCHD).


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



About the Author: Dipanjan Banchur


Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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