What Is the Vanguard U.S. Value Factor ETF and Who Should Buy It?

Published: Wednesday, July 22, 2026 at 1:20 pm

Vanguard U.S. Value Factor ETF Outperforms Market, Offers Diversified Approach

In a market often dominated by the allure of technology and artificial intelligence, a different investment strategy is quietly gaining traction. The Vanguard U.S. Value Factor ETF, a fund focused on identifying and holding undervalued stocks, has demonstrated significant performance, outshining major market indices over the past year. This exchange-traded fund, designed to capture companies trading below their fundamental worth, has seen its shares appreciate by approximately 28.5% in the last twelve months, surpassing both the S&P 500 and the tech-centric Nasdaq-100.

The Vanguard U.S. Value Factor ETF, while part of Vanguard's broader offerings, distinguishes itself with an actively managed, rules-based quantitative approach. This strategy employs a model to select U.S. stocks believed to be undervalued and poised for future outperformance. The fund boasts a substantial portfolio of 666 stocks, encompassing companies of all sizes, from large-cap to small-cap, ensuring broad diversification across the market spectrum.

Sector allocation within the ETF is notably diverse, with financials leading at 25.7%, followed by consumer discretionary at 16.8%, healthcare at 14.6%, technology at 11.4%, and industrials at 9.8%. Since its inception in February 2018, the fund has delivered an average annualized return of 10.96% based on net asset value. More recent performance figures show annualized returns of around 27.9% over the past year and 10.8% over the last five years. The fund's top holdings are spread across energy, healthcare, and technology sectors, including companies like EOG Resources, Bristol Myers Squibb, Salesforce, Cigna Group, and Intuit.

Vanguard's own research suggests a bullish outlook for value stocks, forecasting they could outperform growth stocks by 1.6 to 3.6 percentage points annually over the next decade. The Vanguard U.S. Value Factor ETF aligns with this strategy, offering a comprehensive, all-cap value investment. Investors who believe in the potential of undervalued companies to become future market leaders, and who are comfortable with a slightly higher expense ratio for an actively managed fund, may find this ETF a compelling option. However, it is worth noting that other value stock funds may offer lower fees, potentially making them a more cost-effective choice for some long-term investors.

BNN's Perspective: The Vanguard U.S. Value Factor ETF presents an intriguing case for investors seeking an alternative to the prevailing growth-oriented market narratives. Its strong recent performance and diversified holdings suggest that value investing principles remain relevant. While the slightly higher expense ratio compared to passive funds warrants consideration, the fund's active management and demonstrated ability to identify undervalued opportunities could justify the cost for those aligned with its investment philosophy. As always, thorough due diligence and alignment with individual financial goals are paramount.

Tags: Vanguard U.S. Value Factor ETF, value stocks, undervalued stocks, ETF performance, S&P 500, Nasdaq-100, actively managed ETF, quantitative model, diversified portfolio, large cap, mid cap, small cap, financials, consumer discretionary, healthcare, technology, industrials, annualized returns, growth stocks, expense ratio

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