Why Value Strategy Now?
Growth has been outperforming for about a decade, but has been wobbly since mid-2019. The chart below shows the rolling 10-year performance of the stock market’s lowest price-to-earnings (P/E) value stocks against the highest P/E growth stocks. In the decade to February 2000, the most expensive stocks beat the cheapest by 2.7% a year, not much unlike the situation today.
10-Year Annualized Outperformance, Low P/E Stocks vs. High P/E
Source: Ken French Data Library, 07/31/1951 - 12/31/2019, with data through 01/31/2020 using WisdomTree's attribution software on the S&P 500 for the final month. Past performance is not indicative of future results.
Annualized Performances by Decade
Growth and Value have rotated in and out of fashion each decade for the past four decades. During the 2010s, growth outperformed. Perhaps the 2020s are the decade for Value to shine.
Sources: Ken French Database, 6/30/1951–10/31/2019. Growth and Value stocks defined as the 20% of stocks with the highest and lowest P/E ratios, respectively. Data begins with the 1950s (6/30/1951); latest data ends with 2010s (10/31/2019).
Our Value Proposition
Our dividend and core Modern Alpha® ETFs naturally tilt toward Value.
While most ETFs weight by market capitalization, at WisdomTree, we believe fundamentals like dividends and earnings offer a more objective measure of company health. Our core and dividend-oriented Modern Alpha® ETFs weight by fundamentals, providing a natural tilt toward Value because the methodology keys in on stocks with higher dividend yields and/or lower price/earnings ratios. Furthermore, we rebalance back on a regular basis, enabling our ETFs to continue to focus on Value investing.