IVSS targets US small and mid-cap stocks using Applied Finance's Intrinsic Value Strategy (IVS), which identifies companies trading below their calculated economic worth. This quantitative approach aims to find mispriced SMID caps where the market hasn't recognized fundamental value.
How It Works
The fund employs Applied Finance's proprietary valuation model that adjusts traditional metrics for accounting distortions and focuses on economic profit rather than reported earnings. It systematically screens the SMID universe for stocks with the largest discount to intrinsic value, then weights positions based on conviction level and liquidity constraints. The strategy rebalances quarterly to capture valuation changes while managing turnover.
Key Features
- Economic profit focus strips out accounting noise that trips up traditional value screens
- SMID cap universe offers less analyst coverage where systematic value hunting can excel
- Zero expense ratio makes this cheaper than any active SMID value fund
Risks
- Brand new fund with no track record — the model might work great in backtests but fail in live markets
- SMID value can underperform for years when growth dominates, testing investor patience severely
- Quantitative models can break when market regimes shift — what worked historically may stop working
Who Should Own This
Best for investors who believe SMID caps offer alpha opportunities but don't trust active managers to find them consistently. Works as a satellite holding alongside broad market exposure, especially for those wanting systematic value exposure without paying active fees. Patient investors who can stomach extended periods of underperformance will handle this strategy best.