These Growth Funds Are On Quiet Sale

A handful of funds are trading at a discount to their own historical valuations while their underlying company earnings hold steady.

The portfolio inside the iShares S&P 500 Growth ETF is currently trading 9% below its own historical norm. This is the kind of discount that rarely makes headlines, because it signals that the market has simply lost interest, not that the underlying businesses are broken. This list isolates funds where valuations have cooled relative to their own past, even as the earnings of the companies they hold have not.

This Is An Uncommon Trait.

Out of 131 US-focused equity funds, only 9 qualify today, suggesting a durable business that has quietly gotten cheaper. The clearest example is the iShares S&P 500 Growth ETF (IVW), which leads a small group of funds passing this test. The table below shows the top five qualifiers, ranked by the assets they manage.

Of the 9 funds that qualify, the table shows the five largest by assets under management.

While the S&P 500 itself has returned +71% over the past three years, some of these funds have delivered more. Notice the State Street Communication Services Select Sector SPDR ETF (XLC), which generated a 3-year alpha of +6.1% a year over the market.

IVW Proves Growth Can Get Cheaper

The iShares S&P 500 Growth ETF (IVW) shows how a popular fund can fall out of favor without falling apart. Its holdings trade at an aggregate 32.89 times earnings, a solid discount to its own multi-year average of 36.23. This valuation dip comes after a strong run, with the fund returning +94% in total over the past three years.

That performance came with a 3-year alpha of +2.5% a year over the S&P 500, meaning it beat the market on a risk-adjusted basis. However, its recent edge is fading; its current 1-year alpha is -4.9%, a sign that its recent performance has lagged. The fund's concentration is also notable, with its ten largest holdings making up 59% of the portfolio.

SPYG Delivers A Similar Ride For Less

The State Street SPDR Portfolio S&P 500 Growth ETF (SPYG) offers a nearly identical profile to IVW but with a key difference for a long-term holder. Its portfolio also trades 9% below its own historical norm, and its 3-year total return of +94% is almost the same. Its beta of 1.08 and 3-year Sharpe ratio of 1.02 are carbon copies of IVW's.

The meaningful distinction is cost. SPYG carries an expense ratio of 0.04% a year, considerably less than IVW's 0.18% fee. For two funds offering such similar exposure and historical results, the lower fee presents a clear mathematical advantage over time.

When A Discount Is Earned

A lower valuation is not always an opportunity. Consider the State Street Consumer Discretionary Select Sector SPDR ETF (XLY), whose discount might be deserved. The fund has produced a 3-year alpha of -4.1% a year, meaning it has consistently underperformed the S&P 500 even after accounting for its higher-than-market beta of 1.25.

This list is best used as a starting point. If you have been waiting for an entry into a specific market category, check whether one of these funds offers the discount you have been looking for. Before acting, verify that the earnings of its top holdings are genuinely holding up.

Want To Run A Different Screen?

This is one screen among many, tuned to a single question. If what you care about is a different angle - momentum in a sector, income without the decay, skill without the leverage - the same underlying data answers those too, and it can score any fund you already hold on the exact measures above.

Our ETF Valuation and Performance Scorecard puts every one of these measures - alpha, beta, Sharpe ratio, valuation versus its own history, cost, and concentration - side by side for every major US equity ETF. Run this exact check on any fund you own; it takes seconds, and the result is often not what the fund's marketing suggests.

A Fund Is Only Part Of Your Portfolio, Check The Rest

A fund is just one piece of what you own, and the same scrutiny applies to every other position in your portfolio. How much damage any single position could do to your net worth is a question with a precise answer. The Trefis Wealth team computes it for investors professionally, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.