VTV tracks the CRSP US Large Cap Value Index, selecting large-cap US companies that score well on value metrics — lower price-to-book, price-to-earnings and price-to-sales ratios relative to the broad market. The portfolio tilts away from high-multiple technology companies and toward financials, healthcare, energy, industrials and consumer staples — sectors that traditionally trade at lower valuations relative to earnings. The value factor has an extensive academic pedigree going back to Fama and French, with long-term historical evidence of value outperformance over growth over very long periods. The past decade was unusually difficult for value strategies as technology mega-caps with high growth rates and high multiples dominated returns. Value typically outperforms growth when interest rates are rising — since high-multiple growth stocks are more sensitive to discount rate increases — and in periods of economic recovery when cyclical value sectors regain earnings momentum. The dividend yield of around 1.9% is higher than VUG and the broader market, reflecting the income-generating nature of the underlying businesses. For investors, VTV is a natural complement to VUG for those who want to maintain balanced style exposure, or a standalone tilt for those who believe current growth stock valuations are elevated and value offers better risk-adjusted forward returns.
