Vanguard US Momentum Factor ETF

VFMO

Market cap $1.19B

Vanguard U.S. Momentum Factor ETF offers active momentum exposure and is best used as a complement to a core Russell 3000 ETF, like IWV. VFMO provides diversification benefits through lower tech concentration, higher exposure to Industrials and small/mid-caps, and a distinct sector allocation versus IWV. Despite similar long-term returns and lower Sharpe ratios, VFMO's active management reduces drawdown risk and correlation during market stress, enhancing risk-adjusted performance.

Vanguard U.S. Momentum Factor ETF continues to outperform peers, with strong returns and a diversified portfolio across market caps and sectors. VFMO maintains a buy rating, supported by positive technical signals, robust momentum, and a favorable seasonal period ahead. Despite a recent market drop, VFMO shows resilience, reasonable valuation, and attractive long-term growth prospects with limited single-stock risk.

Vanguard's deceased founder Jack Bogle routinely slammed other firms for offering more expensive actively managed funds. Now his firm is doing just that.

The Vanguard U.S. Momentum Factor ETF has experienced recent volatility, but remains a buy due to its valuation and emerging relative strength. VFMO's assets under management have grown significantly, and it offers a low expense ratio and attractive PEG ratio despite recent performance issues. The ETF has a diversified portfolio with significant exposure to mid- and small-cap stocks, and a shift towards value stocks is expected.

The Vanguard U.S. Momentum Factor ETF (VFMO -2.90%) narrowly beat the S&P 500 in 2024. But it is already up 6.3% year to date as of Jan. 26, outperforming the S&P 500's 3.7% gain.

VFMO is Vanguard's U.S. Momentum Factor ETF and offers investors diversified exposure to small, mid, and large-cap stocks with strong short- and long-term momentum features. Diversification is often seen as a positive selling point, but in this case, it's hindered returns since its February 13, 2018, launch date. VFMO lagged behind large-cap momentum stocks, represented by SPMO, by 1.28% per year from March 2018 to December 2023 and then underperformed by a massive 28% in 2024.

This Vanguard fund could help diversify your ETF portfolio.

I have a buy rating on VFMO due to its solid diversification, high relative strength, and impressive technicals, indicating more upside potential. VFMO's modified equal-weighted portfolio offers a unique approach compared to MTUM and SPMO, making it a standout mid-cap ETF with strong performance. The ETF's diverse sector allocation, solid valuation metrics, and bullish seasonal trends make it a compelling investment choice.

Vanguard U.S. Momentum Factor ETF offers well-diversified allocations with modest valuations, making it attractive in a stretched valuation environment. VFMO's top holdings are mostly in the technology sector, but the fund maintains a diversified investment profile compared to the Russell 3000 index. VFMO's performance has been on par with benchmarks over 3-5 years, but has outperformed in the short term, despite modest exposure to mega caps.

Vanguard's U.S. Momentum Factor ETF has the ability to outperform the S&P 500 Index and peer momentum funds due to its quantitative holdings selection method. VFMO has a low expense ratio and strong performance with broad diversification of market caps and sectors. VFMO's selection methodology has achieved momentum greater than its peers despite a lower turnover rate in holdings.