AVUV Stands Out Among Small Cap ETFS. Should You Buy?

The Avantis US Small Cap Value ETF (AVUV) strategically targets a diverse array of small-cap US companies, investing across multiple market sectors and industries. Typically, it commits at least 80% of its assets to the securities of small-cap firms within the United States. Moreover, the fund enhances its investment strategy by employing various derivative instruments, including futures contracts, currency forwards, and swap agreements. However, there are other similar funds out there, so what makes this one stand out? And is AVUV stock a good investment? To figure that out, let’s first look at the metrics.

As of the latest trading day, AVUV stock closed at $92.01, down $4.03 or 4.20% from its previous close. Furthermore, during pre-market hours, the ETF’s price dropped to $88.35, marking a decrease of $3.66, or 3.98%. AVUV also exhibited notable fluctuations throughout the day, ranging between $91.00 and $97.00 approximately. 

The market observed key trading periods at 10:00 am, 1:00 pm, 4:00 pm, and 7:00 pm. This performance underscores recent volatility and shifting investor sentiment.

Investment Strategy and Metrics

AVUV Stock’s stated investment objective in its prospectus sometimes doesn’t align with its investment strategy. Morningstar Inc, an American financial services company headquartered in Chicago, assigns categories based on the actual securities within each portfolio. 

These categories aid both investors and professionals in making meaningful fund comparisons. They also facilitate the construction of diversified portfolios, the evaluation of potential risks, and the identification of top-performing funds. 

In addition, Morningstar categorises funds based on their portfolio statistics and compositions from the past three years. The company also provides an estimated category for new funds with no historical data until it determines a more permanent classification. Category adjustments may occur if there are significant changes in the fund’s portfolio.

AVUV Morningstar rating claims it’s a high-risk investment. Typically, such stocks bring more profit, but investors should be extra cautious if they add them to their portfolios.

Assessing AVUV: Long-Term Growth, Factors, and Risks

The AVUV stock price history reflects its strategy of targeting long-term capital growth by investing primarily in a diverse selection of small-cap US companies spanning various sectors and industries. However, two critical aspects warrant attention when we discuss this stock.

Firstly, it is crucial to verify that the ETF delivers the factor tilts you seek. AVUV stands out with its strong factor loadings for size and value. Furthermore, before committing to one specific fund, investors should understand its selection process and target companies and feel comfortable with their choice.

Avantis’s methodology is impressive, providing robust factor exposure and excellent value for the cost. In contrast, Vanguard Small-Cap Value ETF (VBR) includes considerable mid-cap exposure, necessitating thorough research. While superior factor exposure often entails higher costs, a 0.25% expense ratio, though reasonable to some, might seem steep to a strict Boglehead.

Secondly, consider the behavioural dimension. Factors can underperform over extended periods, leading to tracking error regret. Avoid the pitfall of making impulsive decisions and abandoning a strategy prematurely.

Ultimately, the choice hinges on your personal risk tolerance and comfort level with holding a fund that may underperform temporarily. Some investors possess the fortitude to remain committed without difficulty.

AVUV/USD 5-Day Chart

Comprehensive Analysis: AVUV vs. VBR ETFs

Another effective way to determine the stock’s potency is to compare it to an asset of a similar classification. The AVUV (Avantis US Small Cap Value ETF) and VBR (Vanguard Small-Cap Value ETF) are both exchange-traded funds focused on small-cap value stocks in the United States. When comparing AVUV and VBR, investors should consider several key factors that highlight the differences and similarities between these two ETFs.

Managed by American Century Investments, AVUV does not follow a specific underlying index. This principle allows for more flexible management. In contrast, Vanguard’s VBR tracks the CRSP US Small Cap Value Index.

In recent trading, AVUV closed at $92.01, reflecting a 4.20% decline, whereas VBR closed at $188.16, showing a smaller decline of 3.00%. Over the past month, the first ETF gained 7.66%, slightly outpacing the second ones’ 7.42% increase.

In the last three months, AVUV’s performance was 9.18%, compared to VBR’s 8.07%. Year-to-date, VBR edged out AVUV with an 8.92% increase versus AVUV’s 7.82%. However, AVUV surged by 16.39% over the past year, surpassing VBR’s 13.95%.

Furthermore, over the three-year period, AVUV’s annualised return was 11.28%, significantly higher than VBR’s 6.61%.

Expense Ratio and Assets Under Management

Expense ratios are a crucial consideration for investors. AVUV has an expense ratio of 0.25%, higher than VBR’s 0.07%. This difference could impact long-term returns, especially for cost-conscious investors. VBR manages significantly more assets, with $30.04 billion under management, compared to AVUV’s $13.33 billion. The larger asset base of VBR might provide greater liquidity and stability.

Furthermore, both ETFs exhibit strong liquidity, with AVUV having an average daily trading volume of $65.40 million, slightly higher than VBR’s $61.48 million. AVUV holds 765 different securities, offering diversification within the small-cap value sector. The specific number of holdings for VBR is not provided, but it is generally known to be well-diversified.

Other metrics further illustrate the differences between these ETFs. The average spread for AVUV is 0.04%, marginally narrower than VBR’s 0.05%, indicating slightly lower trading costs for the former. The median tracking difference over 12 months for VBR is 0.08%, but there is no available data for AVUV.

Is AVUV a good investment? Overall, analysts consider the stock a moderate buy currently. This estimation is based on 345 hold ratings, 362 buy ratings, and 22 sell ratings. However, the average price target for this stock is $106.93 currently.

Both AVUV and VBR offer unique advantages in the small-cap value ETF space, with AVUV showing stronger recent performance and more active management, while VBR provides lower expenses and greater assets under management – ultimately, investors should carefully weigh these factors against their personal investment goals and risk tolerance before making a decision.

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