AVIV targets deeply discounted international stocks using a multi-factor approach that goes beyond simple P/E ratios. The fund hunts for profitable companies trading below their fundamental worth across developed markets outside the US.
How It Works
The fund uses profitability-adjusted value metrics to avoid value traps — cheap stocks that deserve to be cheap. It overweights companies with strong cash flows relative to their market price while screening out unprofitable businesses. Holdings are weighted by a combination of market cap and value characteristics, creating larger positions in stocks showing the deepest discounts. The portfolio typically holds 200-400 names with quarterly rebalancing.
Key Features
- Profitability screen eliminates classic value traps that plague simple value indices
- Broader value definition captures multiple valuation metrics beyond just P/B ratios
- Active implementation at index-fund pricing — no expense ratio currently charged
Risks
- Value stocks can underperform growth for years — lagged tech rally by 30%+ in recent cycles
- Heavy financials and energy exposure creates sector concentration risk during banking crises
- Currency risk unhedged — dollar strength can erase 10-15% returns in bad years
Who Should Own This
Best for patient investors who believe international markets are mispricing profitable companies and can stomach multi-year periods of underperformance versus growth strategies. Works as a 10-20% satellite position for US-heavy portfolios seeking geographic and factor diversification, particularly those worried about US market valuations.