Schwab U.S. Large-Cap Value ETF SCHV constructs a well-diversified, market-cap-weighted basket of U.S. value stocks at a low cost. It earns a Morningstar Analyst Rating of Silver.  

The fund replicates the Dow Jones U.S. Large-Cap Value Total Stock Market Index, which holds large-cap stocks from the cheaper side of the market and weights them by their market caps. These companies have modest valuations that reflect their dimmer outlooks. However, performance relative to expectations is what counts, and these firms' meager valuations are a low hurdle to deliver solid returns.  

U.S. large-cap stocks attract widespread attention such that new information is quickly reflected in prices. Market-cap-weighting is a sensible approach here. It harnesses the market's collective wisdom of each stock's relative value. 

The fund accurately mimics the contours of its average peer, which emphasizes the fund’s minuscule fee in driving Morningstar Category-relative outperformance over the long run. The fund’s sector allocations did not deviate by more than 4 % from the category average as of March 2023. It also trades at a similar average valuation level as its typical peer. On the other hand, the fund has a lower average market cap than the category average because of its broad reach, which improves overall diversification. 

The fund diversifies stock-specific risks better than its average peer. Its top 10 holdings represent only 18% of the portfolio, while the category average is 31%.

Analyst Rating

Cheap fund with recent hiccups.

Associate Analyst

Mo'ath Almahasneh

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Exxon Mobil

JPMorgan Chase & Co

Johnson & Johnson

Procter & Gamble

Home Depot

Chevron

Merck

AbbVie

PepsiCo

The Dow Jones U.S. Large-Cap Value Total Stock Market Index constructs a market-cap-weighted portfolio that channels the market's collective wisdom and diversifies risk effectively. It earns an Above Average Process Pillar rating.

Above Average

Process

Schwab has strengthened its equity index management team over the past few years, under the leadership of Chris Bliss. It earns an Above Average People Pillar rating.

Bliss leads Schwab's equity index team. Since joining Schwab from BlackRock in 2016, Bliss has strengthened the team by increasing specialization and automating more of the managers' workflow. This allows the managers to spend less time on routine tasks and helps them better identify and resolve issues that require their attention. Ferian Juwono, Sabya Sinha, Jeremy Brown, and Agnes Zau join Bliss as named managers on this fund. The named managers have support from associate managers who help the team prepare for index rebalances.

The team looks for ways to slightly improve returns by handling some corporate actions differently from the index. The managers can take advantage of those opportunities when they occur, under tight tracking-error constraints.

Schwab compensates its managers based on tracking error and compliance with risk management, which helps align their interests with investors'.

People

Schwab Asset Management Solutions continues moving along the path established years ago, focusing on low-cost core investment strategies and solutions. It maintains its Above Average Parent Pillar rating.

Rick Wurster oversees SAMS--Schwab’s asset-management arm, which as of late 2019 houses its legacy investment management, advisory, research, and client solutions businesses under one roof. The division maintains a strong focus on Schwab’s core fund lineup while investing in other areas to reduce costs and grow its investment capabilities. Its recent investments have focused on new technology to improve operational efficiency and risk management, including automated risk reporting. Portfolio management teams have benefited from some of those advances. The index-tracking portfolio management team, which oversees about half of the firm’s assets, consistently delivers tight index tracking that is on par with the best teams in the business.

SAMS supports Schwab’s brokerage business, and its funds are used in many client solutions. That setup, along with a more efficient operation, helps funds grow quickly and allows Schwab to keep management fees in line with its bigger competitors’. Historically, Schwab has quickly responded to fee cuts from its competitors by lowering the expense ratios on its own funds. The firm’s index-tracking mutual funds and exchange-traded funds typically sport some of the lowest expense ratios in their respective categories.

The firm has remained disciplined in its product development. New strategies are few and far between, and recent launches fit well with its low-cost core lineup.

Parent

Schwab U.S. Large-Cap Value ETF

SCHV tracks a market-cap-weighted index of value stocks based on terms of projected, current and historical metrics.

The Schwab U.S. Large-Cap Value ETF (SCHV) was launched on 12/11/2009, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Value segment of the US equity market.

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Schwab U.S. Large-Cap Value ETF™ holds more than 500 stocks with value characteristics. The SCHV ETF is better diversified than the S&P 500 across sectors and holdings. Valuation looks attractive; quality is average.

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The Schwab U.S. Large-Cap Value ETF does not appear to be the best choice for investors hoping to profit significantly from a potential stock market recovery. Economic growth trends are a positive sign for the stock market as a whole, but rising investor confidence is more likely to support hard-hit growth stocks than value stocks.

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Over the past six months, value funds have held up reasonably well. This is a trend I expect to continue going deeper into 2023. Value offers investors a less frothy way to enter the market. These are still large-cap names, but don't trade at extreme valuations. Further, growth themes still look expensive in comparison.

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SCHV is down for the year but it is beating the broader market and its growth counter-part. This should pique investor interest, especially those looking to limit downside. I believe the fund is well positioned going forward, given its largest weighting in the Financials sector. This is an area I have been bullish on in the short term.

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