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Should Vanguard Mega Cap Value ETF (MGV) Be on Your Investing Radar?

Style Box ETF report for MGV

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This story originally appeared on Zacks

Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the Vanguard Mega Cap Value ETF (MGV) is a passively managed exchange traded fund launched on 12/17/2007.

- Zacks

The fund is sponsored by Vanguard. It has amassed assets over $4.68 billion, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 2.23%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 24.70% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Jpmorgan Chase & Co. (JPM) accounts for about 3.57% of total assets, followed by Berkshire Hathaway Inc. (BRK.B) and Johnson & Johnson (JNJ).

The top 10 holdings account for about 23.16% of total assets under management.

Performance and Risk

MGV seeks to match the performance of the CRSP U.S. Mega Cap Value Index before fees and expenses. The CRSP US Value Style Indexes are part of CRSPs new investable index family. Securities are assigned to a size-based market cap, then they are eligible for assignment to a value or growth index using CRSP?s multifactor model. Value securities are classified based on factors: book to price, forward earnings to price, historical earnings to price, dividend-to-price ratio & sales-to-price ratio.

The ETF has added about 23.08% so far this year and it's up approximately 36.93% in the last one year (as of 10/27/2021). In the past 52-week period, it has traded between $74.22 and $103.92.

The ETF has a beta of 0.94 and standard deviation of 22.45% for the trailing three-year period, making it a medium risk choice in the space. With about 151 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Mega Cap Value ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, MGV is a great option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $56.80 billion in assets, Vanguard Value ETF has $87.69 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.



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Vanguard Mega Cap Value ETF (MGV): ETF Research Reports

 

JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

 

Johnson & Johnson (JNJ): Free Stock Analysis Report

 

Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report

 

Vanguard Value ETF (VTV): ETF Research Reports

 

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

 

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