The Acquirers Small and Micro Deep Value ETF (DEEP) seeks to track small and micro-cap stocks trading at extremely low valuations using deep value metrics. This value-focused equity ETF targets undervalued companies with market capitalizations typically below $2 billion that may be temporarily out of favor.
How It Works
DEEP employs a quantitative screening process that identifies small and micro-cap stocks based on traditional value metrics like low price-to-book ratios, low price-to-earnings ratios, and high dividend yields relative to market price. The fund uses equal weighting rather than market-cap weighting to prevent larger holdings from dominating the portfolio. Holdings are typically rebalanced quarterly to maintain equal allocations and capture new value opportunities as market conditions change.
Key Features
- Focuses exclusively on small and micro-cap deep value stocks often overlooked by larger value ETFs
- Equal weighting methodology ensures smaller companies receive same allocation as slightly larger ones within universe
- Zero expense ratio makes it one of the most cost-effective ways to access deep value investing
Risks
- This ETF can lose significant value during growth stock rallies when deep value stocks underperform, potentially lagging for years
- Small and micro-cap stocks face higher bankruptcy risk and liquidity constraints that can amplify losses during market stress
- Value investing can experience prolonged periods of underperformance, potentially declining 40-50% in severe bear markets while taking longer to recover
Who Should Own This
Best suited for experienced investors with high risk tolerance and 7+ year time horizons who understand value investing cycles. Works as a satellite holding (5-15% of equity allocation) for those seeking exposure to deep value opportunities. Requires patience to wait through potential multi-year underperformance periods common in value investing.