As we navigate the first quarter of 2026, the Magnificent Seven exhaustion we tracked last year has given way to broader market participation. At VettaFi, our advisor engagement data shows a quiet but persistent winning streak for value investing. While growth dominated the narrative for years, many investors are shifting their focus toward sectors like financials, energy, and materials. But in this environment, choosing the right sectors is not all that matters. The real sweet spot is found in selectivity.
The Active Advantage in Sector Investing
The evolution of the active ETF has provided advisors with direct exposure to experienced fund managers. While these funds aim for excess return, they are increasingly used as risk management tools that passive exposures may not offer. Passive, market-cap-weighted indices can leave a portfolio vulnerable to overvaluation and top-heavy concentration. Active managers, however, have the discretion to sidestep laggards and high-beta traps.
Take the Davis Select Financial ETF (DFNL). Davis was a pioneer in the active ETF industry, entering the market back in 2017 with the launch of a suite of ETFs. DFNL applies a selective, high-conviction approach to a sector that is often misunderstood. While a passive financial index buys the entire basket, DFNL targets attractive growth that is significantly undervalued. As of mid-February, DFNL was overweight to Capital One Financial, Fifth Third Bancorp, and US Bancorp relative to the S&P 500 Financials sector. This disciplined approach has positioned it as a top performer in the category, earning a five-star rating from Morningstar.
Tapping into Real Assets and Scarcity
The value rotation isn’t stopping at banks. We are also seeing a shift toward real assets as a hedge against scarcity. The Cohen & Steers Natural Resources Active ETF (CSNR) is a prime example of how active management can navigate the complexities of the commodity value chain. While CSNR launched just over a year ago, the firm has a long heritage of active management focused on value sectors.
By using a proprietary risk parity framework, the fund balances exposure across Energy, Metals & Mining, and Agribusiness. In an era of supply constraints and geopolitical shifts, an active approach can add significant value for advisors. The results speak for themselves. CSNR was up 53% in the one-year period ended February 20 and has gained 20% thus far in 2026. Top recent positions include Bunge Global, Exxon Mobil, and Newmont Mining.
Joining the Conversation at Exchange 2026
I’m looking forward to diving deeper into these strategies next month. At the Exchange conference in Las Vegas this March, I’ll be joined on stage by Dodd Kittsley of Davis Advisors and Tyler Rosenlicht of Cohen & Steers. In front of several hundred advisors, we will break down the specific use cases for active ETFs focused on financials and natural resources. I look forward to seeing many of you there. Registration remains open.
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