MarketGrader Featured Index:
MarketGrader U.S. Large Cap Value Index
Finding True Value by Focusing on Quality—Not Just Cheap Prices
The Problem with Conventional Value Indexing
Traditional value indexes select companies primarily because their shares look “cheap” on blunt metrics such as price-to-book or price-to-earnings. But low multiples often reflect low-quality businesses—firms with weak cash flow, poor capital discipline, or eroding competitive advantages. Owning such companies simply because they’re inexpensive can trap investors in chronically under-performing stocks.
MarketGrader’s Solution: Value Through a Fundamentals-First Lens
The MarketGrader U.S. Large Cap Value Index redefines value by keeping the context of quality front-and-center:
- Start with the Entire U.S. Large-Cap Universe
– Companies representing roughly the top-85 % of U.S. market capitalization. - Apply Our 24-Factor GARP + Quality Score
– Each stock is rated daily on Growth, Value, Profitability, and Cash-Flow metrics.
– Key quality signals include free-cash-flow yield, return on invested capital, margin expansion, return on equity, and balance-sheet strength. - Dial Up the Value Component—Without Losing Quality
– For this index, value indicators (e.g., earnings yield, cash-flow yield) receive extra weight inside the composite score.
– Only companies scoring above 50/100 overall remain eligible—ensuring the portfolio never sacrifices quality for “optical cheapness.” - Select the Best 100 Companies
– The top-rated large caps form the index, rebalanced semi-annually to keep the portfolio opportunistic and disciplined.
What Makes This Index Different?
| Traditional Value Index | MarketGrader U.S. Large Cap Value Index |
| Relies on blunt, outdated ratios (P/B, P/E) | Uses a multi-factor value overlay within a 24-variable fundamentals model |
| May hold low-quality firms that “deserve” to be cheap | Screens out companies with weak profitability or poor cash flow |
| Tends to overweight secularly challenged sectors | Sector-balanced rules limit concentration risk |
| Often mirrors broad benchmarks with a small tilt | Delivers a concentrated, conviction-weighted portfolio of ~100 high-quality value opportunities |
The Result: Opportunistic, High-Quality Value Exposure
By locating “unloved yet fundamentally strong” businesses, the index seeks to:
- Capture market beta from large-cap U.S. equities
- Generate excess return through disciplined value and quality selection
- Reduce downside risk associated with owning structurally weak companies
In short, it’s value investing—without the value trap.
Explore the factsheet or contact us to see how the MarketGrader U.S. Large Cap Value Index can enhance core equity allocations with a smarter definition of value.
