ETF Showdown: A Value Tussle

Keeping with the value theme, which we examined earlier this week by taking a look at five value ETFs, this week's ETF Showdown features a match-up between one of the funds previously examined and another that doesn't get a whole lot of press, but could be worth a look for the conservative, value-conscious investor. So we've got value vs. value with the First Trust Strategic Value Index Fund FDV, the one we highlighted earlier this week, and the iShares Morningstar Large Value Index Fund JKF. This match-up is immediately compelling because there are stark differences between the two funds. FDV holds 50 stocks, concentrated mainly among financials, information technology and healthcare names. JKF holds 77 stocks and while exposure to financials and healthcare is significant in this ETF, the energy sector is JKF's top sector allocation at almost 26%. In fact, JKF looks kind of like an energy ETF at first glance because Exxon Mobil XOM, Chevron CVX and ConocoPhillips COP, the three largest U.S. oil companies, combine for about 21% of the ETF's weight. FDV does offer oil exposure, but not to the extent that JKF does. Both ETFs count several major insurance names among their financial services holdings. For example, Dow component Travelers TRV is found in both ETFs. The conservative insurance plays are then tempered by high-beta offerings like Capital One COF and Morgan Stanley MS. Another issue with many value ETFs is that they are often too heavy on Dow stocks, meaning it would almost make more sense for investors to just buy a Dow index ETF with lower fees. FDV has 10 Dow components in its fray, a third of the index, while JKF holds 13 Dow stocks, or almost half the Index. Another major difference between the two ETFs is the fees. JKF is truly a value play with an expense ratio of 0.25% while FDV charges 0.65%. That's a big difference and it almost says investors will pay up to lower their energy exposure with FDV. This is one of the tougher showdowns to decide on, but on the basis of lower fees and less exposure to materials and mining names, JKF wins this tussle by a hair. If FDV's fees were to come down and materials names come back in style, the fund would certainly be worth a look.