Value investing is about finding companies whose stock is priced at a discount by some measure. Factor-based investors often rely on fundamental valuations to identify value stocks, such as earnings per share. Earnings drive stock valuations, and theoretically, inexpensive stocks should outperform stocks with higher valuations.
What is a value factor?
The value factor seeks lower-cost securities that are undervalued relative to their intrinsic value. Less expensive securities that could beat expectations may offer investors more upside.
- Typically defined as price to book, price to earnings, option-adjusted spreads
- Common ways to measure value are through earnings per share, cash flows and earnings yield
Why does it matter?
Investors tend to be overly pessimistic about the potential of cheap, low-growth stocks
The objective of the valuation approach is to exploit that pessimism in a systematic and disciplined fashion
When cheap stocks surprise with higher earnings, that can drive outperformance due to multiple expansion
Fidelity Canada Value ETFs
Fidelity Canadian Value ETF
Fidelity U.S. Value ETF
Fidelity U.S. Value ETF - US$
Fidelity U.S. Value Currency Neutral ETF
Fidelity International Value ETF
Fidelity for value factor-based investment strategy
At Fidelity, our value factor funds seek to track the performance of tailor-made indexes that are actively designed. The Fidelity Canada Value Factor Index is designed to reflect the performance of stocks that have attractive valuations. Typically, cheap stocks, with low prices relative to fundamentals, have historically outperformed the market over time.
Single-factor exposure to companies that exhibit attractive valuations
An outcome-oriented approach that seeks to provide undervalued securities with opportunity to outperform over the long term
An efficient complement to a well-diversified portfolio