Is American Century U.S. Quality Value ETF (VALQ) a Strong ETF Right Now?

Launched on 01/11/2018, the American Century U.S. Quality Value ETF (VALQ) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $239.34 million, this makes it one of the larger ETFs in the Style Box - All Cap Value. VALQ is managed by American Century Investments. VALQ, before fees and expenses, seeks to match the performance of the AMERICAN CENTURY U.S. QUALITY VALUE INDX.

The American Century U.S. Quality Value Index seeks to select securities of large and mid-capitalization companies that are undervalued or have sustainable income.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.29% for VALQ, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.68%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

For VALQ, it has heaviest allocation in the Information Technology sector --about 23.30% of the portfolio --while Healthcare and Industrials round out the top three.

Looking at individual holdings, Johnson + Johnson Common Stock Usd1.0 (JNJ) accounts for about 2.89% of total assets, followed by Abbott Laboratories Common Stock (ABT) and Lockheed Martin Corp Common Stock Usd1.0 (LMT).

Its top 10 holdings account for approximately 25.33% of VALQ's total assets under management.

Performance and Risk

Year-to-date, the American Century U.S. Quality Value ETF has lost about -2.41% so far, and was up about 9.21% over the last 12 months (as of 05/06/2025). VALQ has traded between $54.09 and $64.64 in this past 52-week period.

The ETF has a beta of 0.89 and standard deviation of 15.37% for the trailing three-year period. With about 229 holdings, it effectively diversifies company-specific risk.

Alternatives

American Century U.S. Quality Value ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Capital Group Dividend Value ETF (CGDV) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Capital Group Dividend Value ETF has $15.24 billion in assets, iShares Core S&P U.S. Value ETF has $19.72 billion. CGDV has an expense ratio of 0.33% and IUSV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Value.

Bottom Line

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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This article originally published on Zacks Investment Research (zacks.com).

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