ETF experts suggest avoiding concentration risk with this value play

A new way to screen performance in two lagging areas

Investors are worried concentration risk in the market may want to consider value-oriented investing.

Avantis Investor chief investment strategist Phil McInnis suggests taking a more diversified approach rather than just looking at index funds such as hedge funds. S&P 500. He thinks his firm’s exchange-traded fund strategy can deliver better returns over the long term, focusing on companies with low valuations and strong balance sheets.

“We will be less focused,” he told CNBC.ETF margin” this week. “So we’re making smaller bets on these lower valuations, better profitability [companies] paid in installments over time.”

Avantis US Large-Cap Value ETF (AVLV) monitor Russell 1000 value index, but with a caveat – fund managers screen stocks using a return overlay.

“When we screen and identify companies that are trading at more attractive prices, we do so while also looking at profitability,” McInnis said. “That goes beyond the typical type of passive tools out there that are providing a definition of value versus growth on a single variable or an entire summary of variables.”

Afterward Apple And MetaThe next largest holdings of the Large-Cap Value fund are JP Morgan, Costco And ExxonMobil, according to FactSet. Financial services and retail are the leading industries, each accounting for about 15% of the portfolio, with energy coming in third at nearly 12%.

“Starting at the corporate level and the areas that are by-products, we set limits on those areas to make sure that those bets aren’t too big and we’re not too focused,” McInnis added. into a single field”.

The Avantis Large-Cap Value ETF is up 7.7% in 2024, as of Friday’s market close. The Russell 1000 Value Index rose 4.5% during the same period.



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