There’s been an increasingly large amount of interest in investing based on values as opposed to return potential alone. We see a lot of this when it comes to the ESG space, but there’s a lot of this also going on based on one’s political leaning. Some people don’t want to invest in liberal-tilting companies. Some don’t want to invest in conservative-tilting companies. If you lean towards being a conservative politically and want to align your portfolio to that, then you may want to consider the American Conservative Values ETF (NYSEARCA:ACVF). This fund gives investors a unique option in today’s politically charged environment. It aims to match conservative principles, which has a big impact on what it includes and how it might perform.
ACVF puts at least 80% of its net assets into equity securities of big U.S. companies that fit its politically conservative standards. The fact sheet makes the fund’s goals very clear.
ACVF stands out because of its hands-on management style. The fund tries to avoid companies it sees as against conservative values, which it spots through quality and quantity-based analysis. ACVF tries to swap out regular big-company index funds for something different that conservative investors can feel aligned with.
A Look At The Holdings
The fund’s biggest bets are on well-known U.S. companies, and many of these top 10 names are undoubtedly ones you know about.
NVIDIA (NVDA) sits at the top with 6.86%, and Microsoft (MSFT) follows at 4.73%. Berkshire Hathaway (BRK.A) (BRK.B), Broadcom (AVGO), and Eli Lilly (LLY) make up the rest of the top five. One interesting thing to note here is that, outside of Nvidia and Microsoft, this is actually a relatively spread out fund. The fund explicitly excludes about 28% of the S&P 500, yet appears to be better diversified with its weighting exposure. This is a plus in my view.
Sector Weightings and Composition
When I look at ACVF’s sector weightings, I see a big lean towards Information Technology. This fits with the fund’s focus on large-cap stocks, as tech giants rule today’s market. Consumer Discretionary and Health Care are the second and third biggest sector exposures. This makeup looks a lot like the Vanguard S&P 500 ETF (VOO), which tells us ACVF keeps a sector balance similar to the wider market. The notable underweight? Communication services, which perhaps is due to the perception that social media and content services push so-called “woke” material onto its users.
Peer Comparison
ACVF doesn’t just follow the usual large-cap index fund playbook – it avoids companies it thinks go against conservative values. This strategy might catch the eye of investors who want their money to match their political views. But keep in mind, this screening could make returns go up or down compared to ETFs that cover more of the market. To that end, let’s compare the fund to the S&P 500 ETF (SPY) itself. When we look at the price ratio of ACVF to SPY, we find that the two have performed the same since late 2020. Times when ACVF outperforms and times when it doesn’t. But overall similar performance over time. It appears you can get market-like returns while sticking to a conservative mindset.
Pros and Cons
On the positive side, the fund’s careful screening process matches investments with certain political views, which some investors might like. This way of doing things could lead to better profits if companies that are boycotted don’t do well. When companies like Target get boycotted because of political pushback, it impacts earnings. A fund like this can potentially remove those underperformers before they hit the headlines.
But there are downsides to think about. The conservative screening might reduce the possibility of having top-performing companies in the fund. This could cause the fund to fall behind wider market indexes. Keep in mind this also is a large-cap fund, and arguably large-caps are extended relative to small-caps and foreign markets
Conclusion
The American Conservative Values ETF gives investors a chance to put their money into companies that match their conservative views. It stands out from regular large-cap index funds by steering clear of businesses it sees as unfriendly to conservative ideals. The fund puts a lot of weight on tech stocks and big-name companies, which could mean high growth but also more ups and downs. Personally, I don’t lean conservative or liberal either way, so this doesn’t appeal to me, but I think for certain investors this definitely can make sense for them.
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