Davis Select Financial ETF (DFNL) seeks to provide long-term capital appreciation by investing in undervalued financial services companies globally. This actively managed ETF focuses on banks, insurance companies, asset managers, and other financial firms that the Davis Advisors team believes are trading below their intrinsic value.
How It Works
DFNL employs an active, concentrated approach using fundamental analysis to select 25-35 financial companies worldwide. The Davis team conducts deep research to identify undervalued firms with strong competitive positions, experienced management, and sustainable business models. Holdings are weighted based on conviction levels rather than market capitalization. The portfolio is rebalanced as needed based on valuation changes and new opportunities, with typical holding periods of 3-5 years.
Key Features
- Concentrated portfolio of 25-35 carefully selected financial companies allows for higher-conviction positioning than broad sector ETFs
- Global mandate includes both U.S. and international financial firms, providing geographic diversification within the sector
- Davis Advisors' 50+ year track record managing financial sector investments with focus on long-term value creation
Risks
- This ETF can lose significant value during financial sector downturns, potentially declining 40-60% during banking crises like 2008-2009
- Concentrated portfolio of 25-35 holdings creates higher volatility than diversified funds, with individual stock problems magnifying losses
- Financial sector exposure means performance depends heavily on interest rates, credit cycles, and regulatory changes affecting banking profitability
Who Should Own This
Best suited for investors with 5+ year time horizons and high risk tolerance seeking targeted financial sector exposure. Works as a satellite holding (5-15% of portfolio) for those bullish on banking recovery or rising interest rates. Requires patience for value investing approach to work and comfort with sector concentration volatility.