Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the iShares Morningstar LargeCap Value ETF (JKF) is a passively managed exchange traded fund launched on 06/28/2004.
The fund is sponsored by Blackrock. It has amassed assets over $538.25 million, 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
Large cap companies usually have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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 21% of the portfolio. Consumer Staples and Industrials round out the top three.
Looking at individual holdings, Johnson & Johnson (JNJ) accounts for about 5.54% of total assets, followed by Jpmorgan Chase & Co (JPM) and Procter & Gamble (PG).
The top 10 holdings account for about 37.79% of total assets under management.
Performance and Risk
JKF seeks to match the performance of the Morningstar Large Value Index before fees and expenses. The Morningstar Large Value Index measures the performance of stocks issued by large-capitalization comp that have exhibited value characteristics.
The ETF has lost about -2.65% so far this year and is down about -2.76% in the last one year (as of 12/24/2020). In the past 52-week period, it has traded between $75.97 and $117.83.
The ETF has a beta of 0.96 and standard deviation of 22.86% for the trailing three-year period, making it a medium risk choice in the space. With about 79 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Morningstar LargeCap Value ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, JKF is a sufficient option for those seeking exposure to the Style Box – Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $43.11 billion in assets, Vanguard Value ETF has $59.76 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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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