Why investors can’t dismiss the resilience of value
Excitement for artificial intelligence innovation has re-energized large-cap growth stocks—but we believe the potential for a longer-term value cycle could still be ahead of us. Elevated valuations in tech stocks bring with them expectations that become too hard to fulfill—leading to disappointing returns. That’s why savvy investors are focusing on fundamentals like dividends, and why now may be the time to explore WisdomTree’s Value Investing family.
Vigilance about valuations remains critical as growth stocks still carry elevated multiples. Prudent investors can seek attractively valued companies with an additional key attribute—the ability to grow dividends helping to mitigate the effects of inflation. That includes quality companies with healthy balance sheets and positive cash flows. To help investors looking to capitalize around the world, WisdomTree developed value products in U.S. equities, international developed equities and emerging markets equities that provide this appealing focus on dividends.
We believe dividend weighting offers an edge over traditional market cap-weighted ETFs. Our lightbulb moment came in the early 2000s as the market saw the bursting of the tech bubble. We saw the nascent ETF industry building market cap-weighted funds that gave zero credence to valuations. Research has shown that weighting stocks according to their cash dividends could be accretive to performance—and this is critical in a time of heightened volatility.
To ride the new wave of value, the WisdomTree U.S. High Dividend Fund (DHS) provides exposures to companies that generate high dividends—but in a risk-controlled manner emphasizing dividend sustainability. Market volatility has shown the importance of adding this risk screen overlay to your value strategies. Our flagship value ETF is the WisdomTree U.S. LargeCap Dividend Fund (DLN). Launched in 2006, it has outperformed the Russell 1000® Value Index over nearly all major time periods since its inception.
Equity markets remain a tale of two worlds: growth and value. Combining growth-focused strategies like the WisdomTree U.S. Quality Growth Fund (QGRW) with value-oriented funds such as the WisdomTree U.S. Value Fund (WTV) creates a diversified portfolio that captures potential upside across market cycles.
Why choose between growth and value when you can harness the strengths of both? Discover how a blend of the WisdomTree U.S. Value Fund, WTV and WisdomTree U.S. Quality Growth Fund, QGRW can help build a balanced and diversified core equity allocation.
Across numerous developed nations, value-seeking investors will see many single-digit price-to-earnings multiples. In Japan, we are noting greater valuation appeal and newfound competitiveness from cheaper currencies. Though threats like the war in Ukraine and its impact on energy costs are risks, there is potential for positive developments in geopolitics later in 2023 and the region’s continued transition to different sources of energy that support international developed equities. To access this value segment, the WisdomTree International High Dividend Fund (DTH) targets high-dividend-yielding companies in the developed world outside of the U.S. and Canada.
Emerging markets equities have been running into the wind in recent years, most particularly due to lockdowns in its largest economic market—China—and a very strong U.S. dollar. China’s pent-up demand has built for almost three years. We see an improvement in China’s consumption reverberating across emerging markets and the world. The WisdomTree Emerging Markets High Dividend Fund (DEM) captures the EM opportunity in a value-oriented way, but we also note that sometimes during periods of EM appreciation, investors are well served to focus on small caps with DGS. Many investors are surprised when they learn that a strategy of emerging markets focused on small caps and requiring dividend payments can be extremely broad in its focus.
The decade of value is underway, and we believe investors should be ready to capitalize. Watch this video to learn how dividends reveal value, and how you can find companies that will grow dividends over time.
Watch this video in our Focus Points series to learn how we go about finding today’s attractive value discounts, and why dividends are the key. With Global Chief Investment Officer, Jeremy Schwartz.
Just seven stocks now command a large percentage of the S&P 500’s market cap, more than ever before. Christopher Gannatti makes the case for the WisdomTree U.S. Value Fund, a strategy that sidesteps concentration risk while preserving quality and valuation discipline.
With mega-cap tech driving up valuations, disciplined diversification matters more than ever. Matt Wagner outlines the recent rebalance of the WisdomTree U.S. Value Fund (WTV) and explains how its shareholder yield strategy aims to stay ahead.
While broad market indexes hover near record highs, private equity names are breaking down. Meantime, the last half year or so has rewarded speculative stocks at the expense of quality screens. Jeff Weniger explains why these dislocations call for a rethink in portfolio positioning, especially as valuation extremes and Mag 7 free cash flow concerns pile up.
For more daily insights from our thought leaders, visit our blog.
The Portfolio Analysis Tools Hub (PATH) can help to elevate your efficiency and clarity
