The Financials-Heavy SPYV A Hold For Now

U.S. large-cap value has taken it on the chin during this recent Treasury buying spree. Lower interest rates have lifted long-duration tech and growth equities versus the Financials-heavy value style.

The SPDR Portfolio S&P 500 Value ETF (NYSEARCA:SPYV) was up on its counterpart, SPYG, to start the year, but the Information Technology and Consumer Discretionary sectors have been the top performers in 2023 while Financials, the biggest weight in SPYV has lagged. I’m a hold on SPYV based on valuations, seasonality, and technicals.

SPYV: Sector Allocation Is Heavy In the Now-Volatile Financials

Notice in the chart below that SPYV put in a fresh total return high several weeks ago, and is now back in its frustrating 2021 through early 2022 range. The relative look against SPYV shows that value made a try at rising above its late 2019 peak, but growth has re-found its relative footing. Let’s take a closer look at the SPYV value fund.

SPYV: Total Return All-Time High Sold Into

According to SSGA Funds, SPYV offers investors exposure to S&P 500 companies that could be undervalued versus to the broader market. The index SPYV tracks contains stocks that exhibit the strongest value characteristics based on the following metrics: book value to price ratio; earnings to price ratio; and sales to price ratio. It is a low-cost ETF at just four basis points of annual expenses and features diversified exposure to the U.S. large-cap value style.

Launched in the year 2000, and with more than $15 billion in assets under management SPYV boasts a moderate forward price-to-earnings ratio of 16.4 as of March 16, 2023, and holds 406 individual stocks. The forecasted 3-5 year EPS growth rate is seen just shy of 11%, putting the forward PEG ratio near 1.5. SPYV’s current yield is 2.22% and tradeability is strong with a median 30-day bid/ask spread of just two basis points.

Digging into the portfolio, data from Morningstar suggest that SPYV actually has a material allocation to the growth style. The Style Box shows more than one-fifth of the ETF in growth with 45% marked as blend. So, investors may want to look to a pure-value ETF for true value. The fund’s yield is above the S&P 500 average while SPYV’s momentum is soft right now.

SPYV: Portfolio & Factor Profiles

The value factor tends to chop around now through mid-June before falling into early September when dissecting its relative trend versus the S&P 500 on the seasonal calendar, so this is not telling me a whole lot right now, but the early summer could be an opportunistic time to go underweight value in favor of growth. The data here are from Equity Clock.

SPYV: Neutral Seasonal Trend Vs Growth Until Mid-June

The Technical Take

With a moderate valuation and fair to bearish seasonals on the value factor, I see more mixed signals with the chart. Notice in the graph below that SPYV (price only) has clear resistance near $43 while near-term support is seen at the turn-of-the-year low around $38 – that is where the ETF bounced earlier this month.

A move below $38 would yield a bearish price objective to $33 based on a head-and-shoulders topping pattern shaping up over the last three months. Bigger picture, SPYV is trying for a bearish to bullish reversal, but I assert that $38 must hold for that to continue being a viable technical thesis.

SPYV: Bearish to Bullish Reversal, But $38 Crucial. $43 Resistance.

The Bottom Line

I am a hold on SPYV here. The valuation is not particularly compelling, and there are better ways to play pure value. What’s more, SPYV does not outperform the SPX until early September, on average. The technicals, meanwhile, have clear resistance with shares probing critical support right now.