Why Value Strategies Now?
While growth had been outperforming since before the global financial crisis, the dominant multi-year run appears to have ended. Consider the Russell 3000 Growth and Value Indexes' price-to-earnings (P/E) ratios. Even after this year’s value comeback, the Russell 3000 Value Index’s P/E discount to Russell 3000 Growth remains near multi-year extremes. Fueled by soaring inflation and concern about Fed monetary tightening, value appears positioned to outperform as investors focus on fundamentals.
P/E Ratios of U.S. Value vs. Growth
WisdomTree Value Investing Family
With rates rising, Fed policy tightening and inflation at levels not seen since the 1970s, it’s critical to be hypervigilant about valuations. Investors can seek attractively valued companies with an additional key attribute: the ability to withstand prolonged inflation. To help investors diversify their value allocation and potentially capitalize on today’s environment, WisdomTree offers value products with an appealing focus on dividends.
WisdomTree Dividend-Weighted Value ETFs
We believe our original idea—weighting by dividends—is particularly relevant now as investors engage with the stock market in a time of heightened volatility. Our “aha” moment happened in the early 2000s, when we observed a nascent ETF industry that focused on building market cap-weighted funds that gave zero credence to valuations.
Our research showed that giving stocks weights according to their cash dividends could be accretive to performance. In 2006, we launched our first family of dividend-weighted ETFs, including our flagship value Fund, the WisdomTree U.S. LargeCap Dividend Fund (DLN). Now, as the post-COVID-19 world embraces value investing, we believe dividend weighting gives investors an edge over traditional market cap-weighted ETFs.