Key Points

The Vanguard U.S. Value Factor ETF posted gains of roughly 28.5% in the last year, with an annualized return of 10.96% over its eight-year history.
This actively managed fund carries a modestly elevated expense ratio relative to standard passive Vanguard offerings.

Investor focus often centers on technology shares and the artificial intelligence surge. Yet undervalued equities can sometimes deliver stronger results than prominent names or favored sectors.

The Vanguard U.S. Value Factor ETF (NYSEMKT: VFVA) maintains a broad collection of value-oriented stocks anticipated to trade at reduced valuations relative to their underlying metrics. Over the prior twelve months, this ETF has advanced approximately 28.5%, surpassing both the S&P 500 and the technology-weighted Nasdaq-100.

Examine this Vanguard ETF more closely to determine its fit within a portfolio.

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Vanguard U.S. Value Factor ETF: 666 holdings and 10.96% annualized returns across eight years

Vanguard typically emphasizes low-cost passive index products. This ETF diverges by employing active management with an expense ratio of 0.13%, which exceeds some Vanguard peers yet remains reasonable. Managers apply a quantitative, rules-driven approach to select U.S. equities deemed undervalued with potential for future outperformance.

The ETF encompasses 666 stocks spanning large-cap, mid-cap, and small-cap segments. Sector allocations prove balanced, led by financials at 25.7%, consumer discretionary at 16.8%, healthcare at 14.6%, technology at 11.4%, and industrials at 9.8%.

From its February 2018 launch through net asset value, the fund has generated average annual returns of 10.96%. Recent performance includes roughly 27.9% annualized over the past year and 10.8% over five years.

Leading holdings concentrate in energy, healthcare, and technology:

EOG Resources: 0.84% of the fund
Bristol Myers Squibb: 0.83%
Salesforce: 0.80%
Cigna Group: 0.78%
Intuit: 0.76%

Reasons to consider or avoid the Vanguard U.S. Value Factor ETF

Vanguard anticipates strength in value equities. Internal forecasts project U.S. value stocks to exceed growth stocks by 1.6 to 3.6 percentage points annually over the coming decade. Although no specific funds were named, this ETF aligns with the approach as a diversified all-cap value vehicle.

Investors expecting undervalued names to lead future gains and comfortable with the expense ratio of an actively managed product may find this ETF appealing. Still, it did not rank among top value ETFs, as alternatives offer lower costs that could suit extended holding periods better.

Timing for purchase of shares in Vanguard Wellington Fund - Vanguard U.S. Value Factor ETF

Prior to acquiring shares in Vanguard Wellington Fund - Vanguard U.S. Value Factor ETF, review the following:

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Ben Gran maintains no positions in the referenced securities. The Motley Fool holds positions in and endorses Bristol Myers Squibb, Intuit, and Salesforce. The Motley Fool recommends EOG Resources. A disclosure policy applies.

Opinions expressed reflect those of the author and may not align with views of Nasdaq, Inc.