Avantis® International Small Cap Value ETF (AVDV)

Avantis® International Small Cap Value ETF (AVSC) Summary:

Profile:

• Focus: Invests in small-cap value stocks of international companies.
• Asset Allocation: Primarily invests in equities (stocks) with a smaller allocation to fixed income (bonds).
• Investment Strategy: Utilizes a quantitative model to identify undervalued companies based on factors like profitability and growth.

Objective:

• Aims to achieve long-term capital appreciation by investing in international small-cap value stocks.

Issuer:

• Company: Avantis Investors
• Reputation and Reliability: Avantis Investors is a relatively new asset management firm founded in 2019 by a team of experienced investors with a strong track record.
• Management: Experienced team with expertise in quantitative investing and portfolio management.

Market Share:

• Emerging: AVSC is a relatively new ETF with a market share of approximately 0.5% in the international small-cap value ETF space.

Total Net Assets:

• Approximately $624 million (as of November 10, 2023).

Moat:

• Quantitative Model: Utilizes a proprietary quantitative model that incorporates advanced data analytics and machine learning to identify undervalued opportunities.
• Active Management: Actively managed with the flexibility to deviate from the benchmark index based on the model's insights.
• Cost Efficiency: Lower expense ratio compared to some competitors.

Financial Performance:

• Track Record: Since inception (March 2022), AVSC has outperformed its benchmark index and some competitors.
• Volatility: Historically, AVSC has experienced higher volatility than the broader market, which is typical of small-cap value stocks.

Benchmark Comparison:

• AVSC has outperformed the MSCI EAFE Small Cap Value Index since inception.

Growth Trajectory:

• Positive: The long-term outlook for international small-cap value stocks is positive, driven by potential growth opportunities in emerging markets.

Liquidity:

• Average Trading Volume: Moderately high, indicating decent liquidity.
• Bid-Ask Spread: Relatively tight, suggesting low transaction costs.

Market Dynamics:

• Economic Indicators: Global economic growth, interest rates, and currency fluctuations can impact the ETF's performance.
• Sector Growth Prospects: Emerging markets and specific industries within the international small-cap universe can drive returns.
• Current Market Conditions: Market volatility and investor sentiment can influence the ETF's short-term performance.

Competitors:

• iShares MSCI EAFE Small-Cap Value ETF (SCZ) - 3.5% market share
• Vanguard FTSE All-World ex-US Small-Cap Value ETF (VSS) - 2.5% market share
• Xtrackers MSCI EAFE Small Cap Value UCITS ETF 1C (XSVE) - 1.5% market share

Expense Ratio:

• 0.35%

Investment Approach and Strategy:

• Strategy: Actively managed, employing a quantitative model to identify undervalued small-cap value stocks across developed and emerging markets.
• Composition: Primarily composed of equity securities with limited exposure to fixed income.

Key Points:

• Seeks long-term capital appreciation through international small-cap value stock investments.
• Utilizes a unique quantitative model for stock selection.
• Actively managed with the potential to outperform the benchmark index.
• Moderately high liquidity and competitive expense ratio.

Risks:

• Market Risk: Underlying investments are subject to market fluctuations and potential losses.
• Small-Cap Risk: Small-cap stocks are typically more volatile than large-cap stocks.
• Value Investing Risk: Value stocks may underperform growth stocks during certain market cycles.
• Currency Risk: Exposure to international markets involves currency exchange rate fluctuations.

Who Should Consider Investing:

• Investors seeking long-term capital appreciation through international small-cap value stocks.
• Investors comfortable with higher volatility associated with small-cap and value investing.
• Investors seeking exposure to emerging markets and a differentiated investment approach.

Evaluation of AVSC's Fundamentals using an AI-based Rating System on a scale of 1 to 10: 8.5

Analysis:

• AVSC exhibits strong fundamentals:

  • Robust quantitative model and experienced management team.
  • Outperformance relative to benchmark and some competitors.
  • Competitive expense ratio and moderate liquidity.
  • Positive long-term growth potential.

• Key concerns include:

  • Limited track record (inception in 2022).
  • Higher volatility compared to broader markets.
  • Emerging markets exposure with potential for increased risk.

Justification:

The rating of 8.5 reflects a balance between AVSC's strengths and potential risks. The ETF's differentiated approach, competitive expense ratio, and positive performance history are encouraging. However, the limited track record and inherent volatility of small-cap value investing warrant consideration.

Resources:

• Avantis Investors website: https://www.avantisinvestors.com/
• AVSC ETF Fact Sheet: https://www.avantisinvestors.com/etfs/avsc
• Morningstar: https://www.morningstar.com/etfs/arcx/avsc/quote.html

Disclaimer:

This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial professional before making any investment decisions.