Investors concerned about market concentration risk should consider value investing.
Phil McInnis, chief investment strategist at Avantis Investors, suggests taking a more diversified approach than simply looking at index funds like that S&P 500. He believes his company’s exchange-traded fund strategy can produce better returns over the long term, focusing on companies with low valuations and strong balance sheets.
“We’re going to be less focused,” he told CNBC’s “ETF Edge” this week. “So we’re making a lot of smaller bets on that lower valuation and better profitability [companies] will pay off over time.”
Avantis’ US Large Cap Value ETF (AVLV) tracks the Russell 1000 Value Index, but with one caveat: Fund managers check stocks based on a profitability overlay.
“As we screen and identify companies that are trading at more attractive prices, we also pay attention to earnings,” McInnis said. “This goes beyond the typical passive tools that create a definition of value versus growth based on a single variable or an entire compendium of variables.”
After Apple And Metaare the Large Cap Value fund’s next largest holdings JP Morgan, Costco And Exxon Mobil, according to FactSet. Financial services and retail are the largest weighted sectors, each accounting for about 15% of the portfolio, while energy is third at nearly 12%.
“Based on the company level and the sectors that are a by-product, we have set caps on the sectors to ensure that these stakes are not too large and that we are not overly focused on any one sector,” McInnis added.
Avantis’ Large Cap Value ETF is up 7.7% in 2024 as of Friday’s market close. The Russell 1000 Value Index gained 4.5% over the same period.
Disclaimer
Source link
2024-06-15 15:00:01
www.cnbc.com
