AVLV targets deeply discounted large-cap stocks using a systematic approach that goes beyond simple P/E ratios. The fund aims to capture the value premium while avoiding classic value traps through profitability screens.
How It Works
The fund starts with the Russell 1000 universe but applies proprietary filters emphasizing both valuation metrics (price-to-book, price-to-earnings) and profitability indicators. Unlike traditional value indexes that simply rank by cheapness, AVLV weights positions based on both discount depth and business quality. The methodology tilts heavily toward profitable companies trading below intrinsic value, typically resulting in 100-150 holdings versus 800+ in passive value indexes.
Key Features
- Profitability screens eliminate chronic underperformers that plague traditional value indexes
- Concentrated portfolio (100-150 stocks) versus 800+ in Russell 1000 Value
- Active share typically 40-50% versus passive value benchmarks despite systematic approach
Risks
- Value stocks can underperform growth for years — see 2017-2020 when value lagged by 15%+ annually
- Concentrated bets mean individual stock blowups hurt more than in diversified indexes
- Profitability screens may exclude turnaround candidates that generate the biggest value returns
Who Should Own This
Best for investors who believe in value investing but are frustrated by traditional value indexes full of dying businesses. Works as a core equity holding for those willing to accept tracking error versus the S&P 500, or as a value tilt within a factor-based allocation. Patient capital required — this approach can lag for multiple years before payoff.