The allure of the stock market can be hampered by volatility and economic uncertainty. And while individual stocks typically dance to the erratic rhythm of market sentiments, ETFs have steadily waltzed their way into the hearts of savvy investors. ETFs, especially undervalued ETFs, are ideal for those seeking solid returns over the long haul without the heartburn of micromanaging individual company shares. They not only offer a golden opportunity to tap into the potential of some of the market’s giants but do so at a bargain.
As the clouds of potential economic downturn gather, perhaps the right course of action is in these ETFs’ broad diversification. Simply put, undervalued ETFs shield investors’ needs against market storms to ensure a blend of stability and growth. With that said, I’ve used the ETF.com screener to find three of the best high-reward, undervalued ETFs to wager on now.
Energy Select Sector SPDR Fund (XLE)
Price/Earnings Ratio: 6.9
Dividend Yield: 4%
Starting in 1998, the Energy Select Sector SPDR Fund (NYSEARCA:XLE) fund effectively mirrors the performance of the S&P Energy Select Sector Index to offer a robust footing in the expansive landscape of large-cap energy firms in the S&P 500.
Impressively, XLE has revved up a 15% return over the past 12 months, roughly 427% higher than the sector median. Moreover, it has returned a whopping 179% to its investors in the past three years.
With a modest expense ratio of 0.10%, it manages over $37 billion in assets, positioning it as a beacon for those keen on energy investments. It invests in 26 of the top energy companies globally, including bigwigs such as Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Schlumberger (NYSE:SLB), and others.
Pacer US Cash Cows 100 ETF (COWZ)
Price/Earnings Ratio: 7
Dividend Yield: 2.75%
In the dynamic world of ETFs, the Pacer US Cash Cows 100 ETF (BATS:COWZ) stands out with a sharp focus on free cash flows. While the standard norm for many is calculating free cash flow yield as a market cap over free cash flow, COWZ uses a more holistic approach. It defines it as free cash flow over enterprise value, which encapsulates market cap and debt, and subtracts cash offering a clearer picture of a company’s true value.
The COWZ ETF invests in 102 different businesses and offers one of the most diversified profiles among ETFs. The bulk of its holdings accrues to the energy sphere, followed by healthcare, consumer cyclical, basic materials, and tech spaces. With an expense ratio of roughly 0.5% and a 3-year return of over 87%, there’s much to like about the ETF.
iShares International Select Dividend ETF (IDV)
Price/Earnings Ratio: 5.7
Dividend Yield: 7.8%
iShares International Select Dividend ETF (BATS:IDV) shines as a beacon for those eyeing international dividends. While it tracks the performance of a myriad of international dividend-paying stocks, its allure lies in its prudent risk profile and attractive share price compared to its competition. Launched in 2007, this ETF has significantly grown over the past several years.
With a rich tapestry of holdings spanning developed markets, including the U.K., South Korea, Australia, and Spain, IDV is a golden ticket for investors keen on global exposure in some of the most lucrative economies worldwide. Though its capital returns may not have you jumping for joy, the consistent 15-year dividend history, coupled with 2 years of growth, paints a promising picture. Moreover, with an expense ratio of 0.5% and a meager bid/ask spread of 0.12%, IDV adds a feather in its cap for astute investors.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
