Overview
While CFR’s portfolio as a whole is fairly well-rounded, with stocks spread across roughly seven sectors, a few ETF picks, and some emerging-markets exposure, it lacks a key piece of the puzzle. That puzzle piece is a blend of small-cap and value, and it is the Avantis US Small Cap Value ETF, ticker AVUV. For any of our long-time audience members, the fact that we picked another ETF should be absolutely no surprise; we love a well-rounded and diverse portfolio! The fund is actively managed, unlike our previous ETF picks (VYM and VWO), and comprises small-cap companies with high profitability metrics and strong fundamentals. It avoids value traps and has done so pretty consistently, with only a 6% turnover rate. As for diversification, the fund holds roughly 800 stocks across multiple sectors, with the largest sectors being financials (27%) and consumer discretionary (18%). Notably, financials is not a sector we have covered well in the current CFR portfolio, further supporting AVUV’s strength as a pick.
Why Now?
As of June 2026, the Nasdaq 100’s trailing P/E is 32.95, and compared with its 20-year average of 22.50, the data suggest a current market overvaluation. While that metric alone isn’t enough to start screaming “AI TECH BUBBLE,” it is important when considering that the “Mag 7” currently accounts for over a third of the S&P 500. Mega-cap concentrations are historically high, and when it unwinds, value will benefit the most from the rotation. Now, as always, there are risks to an investment like this, most notably the possibility of a Fed rate hike within the next year. Normally, because small-cap companies often have short-term or floating-rate debt, a rate hike can definitely hurt a smaller company. However, it is notable that value plays with consistent cash flow and profitability are less affected by rate hikes, and the financial sector stands to benefit significantly from a rate hike (a sector that, as previously stated, makes up 27% of AVUV).
Comparison
The most obvious question is how small-cap value stacks up against growth. The seemingly no-brainer answer is that growth crushes value, because after all, it’s growth. However, over the last 12 months, that hasn’t necessarily been the case. Even with the incredible run growth stocks have been on, value has held true. In comparing AVUV to QQQM (Invesco’s Nasdaq 100 ETF, a fund that tracks the index’s large-cap growth stocks), AVUV is up 39.16%, coming in just 2% shy of QQQM’s 41.18% one year increase. This suggests that while value continues to churn, any pullback in the growth market could cause AVUV to leave QQQM in the dust 12 months from now.
Why to Buy
An ETF is (almost) always a strong buy for any portfolio. It allows for diversification and, in some cases, like AVUV, a team actively vetting and handpicking companies for the investor. Whichever way the market rotates, AVUV will be well-positioned, allowing investors to maximize their returns without having to sift through small-cap value companies themselves. With comparable 12-month returns to those of major growth ETFs, sector holdings that are positioned very well to benefit from the current macroeconomic climate, and current market valuations that look a little top-heavy, AVUV is CFR’s Pick of the Week!
