Someone Likes Value

William Ehart

DON’T LOOK NOW, but value is beating growth—just not here in the U.S.

From May 31 through Sept. 29, iShares MSCI EAFE Value ETF (symbol: EFV), which invests in developed foreign markets, is up 5.6%, while iShares MSCI EAFE Growth ETF (EFG) is down 6.5%. That brings the year-to-date performance of the two funds to 9.6% for the iShares value fund and 4% for the iShares growth fund. Meanwhile, the style-neutral iShares MSCI EAFE ETF (EFA) is up 6.9% in 2023. U.S. stocks, as measured by iShares Core S&P 500 ETF (IVV), are up 13.1% for the year, even after their recent selloff.

I’m partial to Dimensional International Value ETF (DFIV), which yields 4.3% and is up 10.7% on the year. The fund’s small-cap sibling, Dimensional International Small Cap Value ETF (DISV), is also doing well in relative terms, up 9.5% year to date, well ahead of the style-neutral iShares MSCI EAFE Small-Cap ETF (SCZ), which is up 1.7% in 2023.

Japan is among the better-performing foreign markets. The iShares MSCI Japan Value ETF (EWJV) is up 18.5% year to date, despite a weak yen, compared with an 11.5% gain for iShares MSCI Japan ETF (EWJ). My little bet on Japan small-cap value continues to do well, though small-caps are lagging large caps in Japan. WisdomTree Japan SmallCap Dividend Fund (DFJ) is up 11.3% year to date, much better than the broad foreign benchmark and the foreign small-cap ETF. I also own stakes in some of the other funds mentioned here.

What about developing countries? Dimensional Emerging Markets Value ETF (DFEV) is up 7.8% year to date, compared with 2.9% for iShares Core MSCI Emerging Markets ETF (IEMG) and 2% for Vanguard FTSE Emerging Markets ETF (VWO), both of which diversify across growth and value stocks. All have heavy stakes in poorly performing China.

I get my emerging markets exposure through the style-neutral iShares MSCI Emerging Markets ex China ETF (EMXC). But despite its avoidance of increasingly authoritarian China, it’s up just 5.7% year to date, still behind Dimensional’s emerging markets value ETF, with its 7.8% gain.

Even in the U.S., value appears to be attempting a comeback versus growth—at least in relative terms. Vanguard Value ETF (VTV) is down 2.9% since July 17, versus a 6.4% decline for Vanguard Growth ETF (VUG).

But for the year to date through September, it’s still an embarrassing showing for U.S. value stocks. Vanguard Value ETF is flat, while Vanguard Growth ETF is up 28.4%. The picture is a little better among U.S. small caps. Vanguard Small-Cap Value ETF (VBR) is up 2.1% in 2023, versus 7.3% for its growth counterpart.

Still, just as those fond of a drink like to say “it’s 5 o’clock somewhere,” it’s good for thirsty value investors to know that cheaper stocks are being rewarded elsewhere in the world. Who knows? Maybe soon it’ll be happy hour for value devotees even here in the land of mega-cap tech stocks.

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