VFVA's Deep Value Strategy Carries a Hidden Volatility Risk Most Investors Overlook - 24/7 Wall St. S&P 5006,553.60 -0.73% By John SeetooPublished Mar 26, 11:18AM EDT Dow Jones46,379.80 -0.21% Nasdaq 10023,918.20 -1.15% Russell 20002,518.04 -0.65% FTSE 1009,993.60 -1.21% Nikkei 22553,127.00 -1.37% Stock Market Live March 26, 2026: S&P 500 (SPY) Slips on Oil Again Investing VFVA's Deep Value Strategy Carries a Hidden Volatility Risk Most Investors Overlook Quick Read Vanguard U.S. Value Factor ETF (VFVA) ...

The macro backdrop amplifies that dynamic. The VIX is around 26, placing it in the 91st percentile of its 12-month range, and has climbed 37% over the past month. When volatility spikes, investors flee complexity and uncertainty, and deep value stocks carry both. The VIX reached 52.33 at its peak last year, an extreme panic reading, and VFVA's discounted holdings would be among the first sold in that kind of flight to safety.Have You read The New Report Shaking Up Retirement Plans ? Americans are answering ...

Market Overview - The market rebound that began in April continued into the third quarter of 2025, with growth and momentum stocks delivering double-digit returns [1] - Small and micro-cap value stocks achieved their best quarterly returns since Q4 2023 [1] Performance of Deep Value Strategy - The Deep Value strategy appreciated by +26.50% in Q3 2025, outperforming the S&P 1500 Value Index (+6.29%) and the S&P 600 Value Index (+11.71%) [1] - Year-to-date, the strategy's net returns are +9.20%, compared to +9.28% for the S&P 1500 Value Index and +3.17% for the S&P 600 Value Index [1] Focus on Nabors Industries Ltd. - Nabors Industries Ltd. (NYSE:NBR) was highlighted as a significant holding, with a one-month return of 10.40% and a 52-week loss of 14.64% [2] - On December 04, 2025, Nabors Industries' stock closed at $56.91 per share, with a market capitalization of $829.501 million [2] Performance and Strategy of Nabors Industries - Nabors Industries was the largest positive contributor to the Deep Value strategy, with a market share price increase of 46% during the quarter [3] - The company is undergoing a multi-year transformation focused on leveraging leading technology, holding over 450 patents and developing industry-leading drilling automation and robotics [3] - Nabors sold its Quail Tools business segment for $600 million, with proceeds aimed at accelerating debt reduction and enhancing the company's balance sheet and liquidity [3]

Market Overview - The market rebound that began in April continued into the third quarter of 2025, with growth and momentum stocks delivering double-digit returns [1] - Small and micro-cap value stocks achieved their best quarterly returns since Q4 2023 [1] Deep Value Strategy Performance - The Deep Value strategy appreciated by +26.50% in Q3 2025, outperforming the S&P 1500 Value Index (+6.29%) and the S&P 600 Value Index (+11.71%) [1] - Year-to-date, the strategy's net returns are +9.20%, compared to +9.28% for the S&P 1500 Value Index and +3.17% for the S&P 600 Value Index [1] Company Highlight: Bread Financial Holdings, Inc. (NYSE:BFH) - Bread Financial Holdings, Inc. is a financial services company offering tech-forward payment and lending solutions, with a one-month return of 13.24% and a 52-week gain of 13.94% [2] - As of December 04, 2025, Bread Financial's stock closed at $72.00 per share, with a market capitalization of $3.29 billion [2] Performance and Transformation of Bread Financial Holdings, Inc. - Bread Financial was the only negative holding during the quarter, with a market share price down 2% [3] - The company has undergone a multi-year transformation to streamline its business model, enhance underwriting processes, and expand brand partnerships [3] - Since the beginning of the transformation in early 2020, capital ratios improved by more than 3x, debt was reduced by $2 billion, and direct-to-consumer deposits increased by over $6 billion [3] - Management has increased credit reserves to 13%, with delinquency rates at half of reserve levels, indicating potential for significant reserve release in the coming years [3] - The company aims for normalized ROTCE in the mid-20% range and normalized earnings above $15 per share, with shares trading at more than 25% normalized earnings yield [3]

Market Overview - The market recovery that began in early April continued throughout the third quarter, with small and micro-cap value stocks posting their strongest quarterly returns since Q4 2023 [2] - Small caps resumed upward momentum after a four-year pause, reaching new highs and breaking the price level peak of 2021, indicating the early stages of a multi-year outperformance cycle for low valuation equities and smaller market caps [2] Technology Sector Insights - The Technology sector's weighting in the S&P 500 increased to 34.8%, significantly above its earnings contribution, indicating crowded ownership and market valuation expansion [3][6] - The Technology sector is nearing its all-time high weighting of 34.9% from March 2000, with forward price-to-earnings multiples above 30x, compared to the 20-year historical average of 18.3x [6][7] - The price-to-sales multiple for the Technology sector is approaching 10x revenue, with the "Magnificent 7" companies nearing 13x, highlighting elevated valuations [8] Valuation Discrepancies - There are significant valuation spreads between low valuation equities and longer duration/technology equities, with Deep Value Select strategy's valuation multiples at over a 70% discount to the S&P 500 Index [10][12] - The small cap sector is emerging from a multi-year earnings recession, with expected earnings growth in 2026 anticipated to outpace larger companies [12] Performance of Deep Value Strategy - The Deep Value Select strategy achieved a quarterly return of +26.50%, outperforming the S&P 1500 Value Index and S&P 600 Value Index [14] - Year-to-date, the Deep Value Select strategy net returns are +9.20%, slightly behind the S&P 1500 Value Index [14] - Ten of the twelve holdings in the strategy delivered positive double-digit returns, with Nabors Industries being the largest contributor, up 46% [16] Company-Specific Highlights - Nabors Industries is undergoing a multi-year transformation focused on technology, with over 450 patents and a strong balance sheet following the sale of its Quail Tools business for $600 million [16][19] - Bread Financial, despite a 2% decline in market share price, has improved its capital ratios and reduced debt significantly, positioning itself for long-term financial targets [20]