AVUV targets deeply undervalued small-cap stocks using profitability screens that traditional value indices miss. This isn't your father's value fund — it systematically overweights the cheapest profitable companies while avoiding value traps.
How It Works
The fund starts with U.S. small caps but aggressively tilts toward stocks with low price-to-book ratios and high profitability metrics. Unlike passive indices that simply sort by P/B, AVUV uses a proprietary scoring system that considers multiple valuation metrics and earnings quality. The portfolio holds roughly 700 names but concentrates weight in the deepest value plays, rebalancing monthly to capture mean reversion.
Key Features
- Profitability filter excludes zombie companies that plague traditional small value indices
- Monthly rebalancing captures value premium more effectively than quarterly competitors
- Deeper value tilt than Russell 2000 Value — typically 30% cheaper on price metrics
Risks
- Can underperform for years when growth dominates — small value lost 40% relative to large growth 2017-2020
- Concentration in financials and energy means sector blowups hit hard — think regional bank crisis
- Liquidity risk during panics — small value stocks can gap down 5-10% on no news in market stress
Who Should Own This
Built for factor investors who understand small value's feast-or-famine nature and can stomach 5+ year droughts. Works best as a 5-15% satellite position for investors tilting away from mega-cap growth dominance. If you're checking performance monthly or need liquidity in downturns, look elsewhere.