Core Insights - Avantis U.S. Small-Cap Value ETF (AVUV) is distinguished among small-cap funds by its focus on equities that are both inexpensive and profitable, a criterion not commonly applied by many small-cap funds [1] Group 1: Fund Characteristics - The fund specifically targets small-cap equities that are undervalued yet demonstrate profitability, setting it apart from other funds in the small-cap sector [1] Group 2: Investment Strategy - The investment strategy emphasizes the importance of profitability in selecting small-cap stocks, which is a unique approach in the small-cap fund landscape [1]

Core Insights - Avantis U.S. Small-Cap Value ETF (AVUV) is distinguished among small-cap funds by its focus on equities that are both inexpensive and profitable, a criterion not commonly applied by many small-cap funds [1] Group 1 - The fund targets small-cap equities that are undervalued and demonstrate profitability [1] Group 2 - The article emphasizes the importance of profitability in the selection process for small-cap investments, which sets AVUV apart from its peers [1]

Group 1 - The article critiques passive small-cap strategies, specifically the iShares S&P Small-Cap 600 Value ETF (IJS), for not adequately screening for quality, which could expose investor capital to risks during market downturns [1] - The Sunday Investor focuses solely on U.S. Equity ETFs and has developed a proprietary ETF Rankings system that evaluates nearly 1,000 ETFs based on various factors including costs, liquidity, risk, size, value, dividends, growth, quality, momentum, and sentiment [1] - The composite score from the ETF Rankings system ranges from 1 to 10, providing an easy-to-understand metric for investors [1]

Core Insights - The Vanguard Small-Cap Value ETF (VBR) and the iShares Morningstar Small-Cap Value ETF (ISCV) target U.S. small-cap value stocks but differ in index tracking, sector allocations, and holdings [1][2] Cost & Size - VBR has significantly higher assets under management (AUM) at $60 billion compared to ISCV's $575 million, providing greater liquidity for investors [3][10] - ISCV has a slightly lower expense ratio of 0.06% compared to VBR's 0.07%, making it marginally more cost-effective [3] - Both funds have similar dividend yields, with VBR at 1.97% and ISCV at 1.89% [3] Performance & Risk Comparison - Over the past five years, ISCV experienced a max drawdown of -25.34%, while VBR had a max drawdown of -24.19% [4] - A $1,000 investment would have grown to $1,531 in VBR and $1,513 in ISCV over the same period, indicating slightly better performance for VBR [4] Portfolio Composition - VBR's largest sector allocations are in industrials (19%), financial services (18%), and consumer cyclicals (13%), holding a total of 840 stocks [5] - ISCV has a broader stock exposure with nearly 1,100 stocks, focusing more on financial services (21%), consumer cyclicals (16%), and industrials (13%) [6] Investor Considerations - ISCV offers greater diversification with 256 more stocks than VBR, but it has experienced higher volatility, indicated by a higher beta of 1.22 compared to VBR's 1.12 [8] - The sector focus differs, with ISCV leaning towards financial services and VBR towards industrials, which may influence investor preferences [9][10]

Core Insights - The Avantis U.S. Small Cap Value ETF (AVUV) has crossed $20 billion in assets under management, reflecting strong investor interest in small-cap value strategies [3][4] - The ETF is positioned to benefit from a potential market rotation away from large-cap growth stocks, especially as the Federal Reserve is expected to cut interest rates [5][10] - AVUV employs a strategic, active management approach with a diversified portfolio of over 700 holdings and low turnover, focusing on high-quality, undervalued companies [11][12] Fund Performance and Strategy - Despite a challenging year for small-caps, AVUV has maintained a strong track record, consistently performing close to the top quartile of its peer group [13] - The fund's expense ratio is relatively low at 25 basis points, making it an attractive option for investors seeking exposure to small-cap value [5][14] - The active management style of AVUV is characterized as "active-lighter," allowing for strategic adjustments without frequent trading [12] Market Outlook - There is optimism that small-cap value stocks could perform well as the new year approaches, particularly if market conditions favor smaller companies [9][10] - The potential for increased merger activity in 2026 could further enhance the attractiveness of small-cap investments [10] - Historical data suggests that small-caps may offer better long-term returns compared to large-caps, especially as they are currently trading at a discount to their historical levels [8][6]

Performance Overview - The Third Avenue Small-Cap Value Fund returned 7.18% in Q3 2025, underperforming the MSCI USA Small Cap Value Index at 8.97% and the Russell 2000 Value Index at 12.60% [2] - The Fund's annualized returns for the trailing three-year and five-year periods were 15.11% and 16.09%, respectively [2] Positive Contributors - Supernus Pharmaceuticals (SUPN) was the largest positive contributor, benefiting from a strong financial position, profitability, an expanding neurology drug portfolio, and a successful acquisition [3] - Investors Title Company (ITIC) saw positive performance due to increased real estate refinancing activity [3] - UMB Financial Corporation (UMBF) successfully integrated its acquisition of Heartland Financial, showcasing operational competence [3] Negative Contributors - Atlanta Braves Holdings (BATRA) was a negative contributor, though it is perceived to have an attractive asset base and potential for favorable resource conversion [4] - UniFirst Corporation (UNF) faced pressure to demonstrate its value proposition after rejecting an acquisition offer from Cintas Corporation (CTAS) [4] - FRP Holdings (FRPH) was impacted by a lack of confidence in government spending affecting the D.C. metro area [4] Investment Strategy - The Fund focuses on acquiring companies in transitional states, aiming to capitalize on undervalued businesses with potential for future growth [5] - Investment activity emphasizes companies that are well-financed, trading at discounts to net asset value, and have identifiable levers for value creation [6] - The Fund's turnover rate is approximately 20%, indicating a long-term investment horizon of about five years, contrasting with the average turnover of 91.7% in the small-cap value fund universe [7] Types of Investment Opportunities - The Fund identifies three broad types of investment opportunities: 1. Companies facing industry-wide headwinds that can improve through restructuring [9] 2. Companies with current economic returns that have underappreciated self-help opportunities [9] 3. Event-driven situations that offer unique return profiles through transformational changes [9] Recent Transactions - Ambac Financial (AMBC) completed the sale of its legacy financial guarantee business, leading to a significant cash inflow and a transformation towards insurance distribution [11][12] - The Fund initiated new positions in Boise Cascade (BCC) and Rogers Corporation (ROG) during the quarter, while also adding to existing positions like UniFirst Corporation (UNF) [14] Company Profiles - Boise Cascade is a leading manufacturer and distributor of building materials, facing challenges due to slowing housing activity but retaining a strong financial position [15][16] - Rogers Corporation specializes in electronic and materials technology solutions, facing growth challenges but possessing valuable intellectual property and a strong balance sheet [18][19][20]