Small Caps + Value = A Winning Combo for 'AVUV'

The value factor itself has seen better days, but when applied to a dynamic small cap rally, the results can be explosive. That is precisely the case for the Avantis U.S. Small Cap Value ETF (AVUV), which is up over 20% for the year.

With its active management, AVUV seeks long-term capital appreciation. The fund invests primarily in a diverse group of U.S. small cap companies across market sectors and industry groups.

Under normal market conditions, it will invest at least 80% of its assets in securities of small capitalization companies located in the United States. The fund also may invest in derivative instruments such as futures contracts, currency forwards, and swap agreements.

AVUV YTD Performance

Value’s Down but Not Out

Financial website Barron’s recently featured an interview with John Rogers Jr., co-chief executive of Ariel Investments. Rogers explored a value comeback.

“To be a value manager, you have to truly be a contrarian and be comfortable buying things people hate,” Rogers said in the interview. “That’s such a different persona than that of someone who loves buying something that has gone up yesterday and [has]all the ‘obvious’ reasons why it’s going to go up forever.”

During a pandemic-ridden 2020, it’s easy to see why growth-fueled investments like technology, have quickly come into favor. The broad-based index like the MSCI SCWI Small Cap Growth index, is up over 20% in a one-year time frame when compared to the MSCI ACWI Small Cap Value index.


However, using those same indexes, the tide could be turning for value. Within a six-month time frame, the value index is actually higher by about 5%. Is it a sign of a bigger move to come?

“Fingers crossed, we are at a tipping point,” Rogers said. “It has been a wonderful reawakening for value [recently]. The signs have been there for a while, and valuations are too far apart. Investment committees are so committed to growth stocks. People come in with consultants who say, ‘Value is dead. This is a new world. It’s really different this time.’ That’s always a sign that we are getting to the top.”


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