Least-valued stock funds dish out the lowest share prices.
In the face of renewed economic concerns caused by the Delta variant of the novel coronavirus, traditional value stock funds are once again at risk of underperforming. However, some funds have managed to stand out, maintaining their competitive edge.
According to recent data from Morningstar, the Vanguard Mid-Cap Value Index Admiral Fund (VMVAX) and the Vanguard Mega Cap Value Index Institutional (VMVLX) are among the top value funds with low price-to-book (P/B) ratios.
The VMVAX focuses on cheaper mid-cap value stocks, tracking the CRSP US Mid Cap Value Index, which emphasizes low price/book stocks. With an expense ratio of 0.07%, it provides yields around 2.4% and moderate turnover (19%). Notable holdings include United Rentals and Oneok, which have contributed positively to returns during recent periods.
The VMVLX, on the other hand, targets the cheapest mega-cap value stocks with strong price to book emphasis. With an expense ratio of 0.06%, it offers a yield around 2.45% and very low turnover (7%). Known for its stable portfolio and low fees, this fund is a popular choice among investors.
While the search results do not explicitly provide Price-to-Earnings (P/E) or price-to-free cash flow data for these funds as of June 30, 2021, it is common for value funds with low P/B ratios to have lower P/Es than growth funds, indicating potentially undervalued earnings. Funds with low price/book ratios also likely hold stocks with attractive free cash flow yields, although concrete figures from Morningstar for these funds at that date are not shown.
Despite the challenges posed by the Delta variant, as of June 30, 2021, traditional value stock funds have shown promising performance, with above-average returns after a period of stagnation. The performance of these funds is closely linked to the state of the economy and the threat of renewed economic issues.
It's worth noting that some traditionally-oriented managers continue to pay less than a euro for each euro of a company's equity, as measured by the price-to-book ratio. To put the price-to-book ratio into context, two additional values have been added: the stock price relative to earnings per share (P/E) and the stock price relative to free cash flow per share. The focus of the presentation is on the present performance of value funds.
For precise historical P/E and free cash flow valuation metrics, a direct database query from Morningstar or a financial terminal would be required. In the meantime, investors can consider the low-cost, stable offerings of funds like the VMVAX and VMVLX as they navigate the uncertain economic landscape.
Investors exploring other low-cost options for their finance could consider investing in funds like the Vanguard Mid-Cap Value Index Admiral Fund (VMVAX) or the Vanguard Mega Cap Value Index Institutional (VMVLX). These funds, with their low price-to-book ratios, have been standing out in the business sector, even in the face of renewed economic concerns caused by the Delta variant of the novel coronavirus.
