AVLV: U.S. Value ETF, Cheap Valuation, Strong Performance Track-Record (NYSEARCA:AVLV)

I last covered the Avantis U.S. Large Cap Value ETF (NYSEARCA: AVLV) in early 2023. In that article, I argued that AVLV’s diversified holdings, cheap valuation, and good performance track-record, made the fund a buy. AVLV has marginally outperformed the S&P 500 since, slightly underperforming my expectations.

I remain bullish on AVLV, for the same reasons as before. At the same time, I’ve since written on several other U.S. value ETFs, with broadly similar characteristics and value propositions to AVLV. These are obvious, important alternatives to AVLV, so thought to compare them in this article.

AVLV – Quick Overview

Quick overview of the fund before comparing it to some of its peers.

AVLV is an actively-managed U.S. large-cap value ETF. Although actively-managed, it tries to maintain a diversified portfolio, built through quantitative methods, so it is not too dissimilar from an index ETF. AVLV invests in almost 300 holdings, the largest of these are as follows:

Although AVLV does invest in several of the largest S&P 500 components, including several mega-cap tech stocks, it does differ markedly from said index. Industry weights are quite different, with AVLV overweight energy, industrials and discretionary consumer goods, underweight tech and healthcare.

Weights overlap by 30%.

AVLV sports a much cheaper valuation than the S&P 500, as expected.

AVLV’s performance track-record is quite strong, with the fund outperforming the S&P 500 and broader U.S. value equity indexes since inception. Returns were particularly strong in 2022, weak in 2023, in-line with broader value performance. Outperformance was partly due to good timing, partly due to a superior strategy (so far).

So, AVLV focuses on cheaply valued U.S. large-cap equities, trades with a discounted valuation, and has outperformed since inception. Seems simple enough. Let’s now do a quick comparison between AVLV and some of its peers.

AVLV versus COWZ

The Pacer US Cash Cows 100 ETF (BATS: COWZ) is broadly similar to AVLV, with some key differences.

Both funds focus on cheaply valued U.S. large-caps.

COWZ focuses on those with particularly high free cash flow yields. AVLV does not specify, although it does mention taking into consideration profitability / book ratios and does not mention cash-flows. I prefer COWZ’s approach, as cash-flows are a particular strong metric as it is hard to fake, and a bit less common (makes for a less crowded trade).

Both funds have outperformed since inception. COWZ’s returns have been stronger.

Both funds have peers with similar strategies and similar strong performances, which I believe is an indication of the effectiveness of these.

As an example, the Pacer US Small Cap Cash Cows 100 ETF (BATS: CALF) has outperformed broader U.S. small-cap and small-cap value equity indexes since inception.

One cash-cow fund outperforming could easily be a fluke. Two could, perhaps, be a coincidence. Pacer has somewhere between 5 – 6 of these, all of which have strong performance track-records, and I don’t think that is a coincidence.

The situation is broadly similar for AVLV.

Avantis has a suite of value ETFs, most of which have strong performance track-records. As an example, the Avantis US Small Cap Value ETF (NYSEARCA: AVUV) has outperformed most relevant benchmarks since inception.

Same situation for most Avantis value ETFs.

I think Avantis ETFs have performed a bit better than Pacer cash-cow funds, but their returns seem close, and results are somewhat dependent on timing / time periods in question.

Both funds are cheaper than the S&P 500. COWZ is cheaper than AVLV.

In my opinion, COWZ is a slightly better investment than AVLV, due to its stronger performance track-record and cheaper valuation.

AVLV versus CGDV

The Capital Group Dividend Value ETF (NYSEARCA: CGDV) is broadly similar to AVLV, with some important differences.

Both funds focus on cheaply valued U.S. large-caps. Details are scarce, but I believe both funds follow very vanilla value strategies, unlike something like COWZ with a clear cash-flow focus.

Both funds have outperformed since inception. CGDV’s performance track-record is a bit stronger, but much shorter.

Capital Group’s other equity ETFs have performed quite well too. As an example, the Capital Group Core Equity ETF (NYSEARCA: CGUS) has outperformed since inception.

Notwithstanding the above, from what I’ve seen the Avantis ETFs as a whole have somewhat stronger performance track-records, with slightly higher returns and much longer lengths. The latter is particularly important insofar as it is an indication of the strength and resiliency of the strategies employed by Avantis.

Both funds are cheaper than the S&P 500, AVLV being much cheaper than CGDV.

I’m not sure that I would describe AVLV as better than CGDV, but I’m definitely more comfortable investing in the former than the latter. The cheaper valuation, longer performance track-record, and overall success of the Avantis value ETFs make me more certain that the fund will outperform moving forward.

AVLV versus DTSL

The Distillate U.S. Fundamental Stability & Value ETF (NYSEARCA: DSTL) is broadly similar to AVLV too, with some important differences.

Both funds focus on cheaply valued U.S. large-caps. AVLV mentions considering profitability and book values. DSTL more explicitly targets companies with low leverage and high, stable cash-flows. I prefer DSTL’s strategy, as I’m quite partial to the cash-flow approach.

Both funds have outperformed the S&P 500 since inception. Returns for these two funds have been effectively equal.

Distillate has two other ETFs, the Distillate Small/Mid Cash Flow ETF (NYSE: DSMC) and the Distillate International Fundamental Stability & Value ETF (NYSE: DSTX). DSMC has outperformed relevant benchmarks, DSTX has not.

Considering the above, the overall track-record of Distillate ETFs is somewhat weaker, definitely shorter, than that of Avantis ETFs.

Both funds are cheaper than the S&P 500, AVLV a bit cheaper than DSTL.

As is the case for CGDV, I’m not sure that I would describe AVLV as better than DSTL, but I do feel a bit more comfortable investing in AVLV. Its longer performance track-record, as well as the broad success of Avantis value ETFs, make me believe more strongly that the fund will outperform moving forward.

Conclusion

AVLV’s diversified holdings, cheap valuation, and good performance track-record, made the fund a buy. It seems broadly comparable to its peers, although Avantis’s longer, broader performance track-record make me a bit more comfortable investing in AVLV over most other value ETFs.