While many individuals stayed dwelling all through the course of the pandemic, an increasing number of drivers are returning to the roads, resulting in a surge in used automotive gross sales and a profit to some small-cap worth shares, experiences The Wall Avenue Journal.
Individuals at present are car-shopping in near-record numbers, which, together with the computer-chip scarcity, has pushed the costs of used automobiles sky-high. Used automotive costs had been up 34% in June over the identical time final 12 months.
Dealerships are reaping the rewards of elevated demand, as seen with dealership large AutoNation (AN).
“Demand continues to outpace provide for brand new autos. We anticipate this to proceed into 2022 as a consequence of customers’ choice for private transportation coupled with decrease rates of interest,” AutoNation CEO Mike Jackson informed Yahoo! Finance.
AutoNation lately reported earnings that fully overshot economists’ estimates. Internet gross sales had been $6.98 billion versus an anticipated $6.07 billion, with diluted earnings per share (EPS) at $4.38 versus an anticipated $2.58.
AutoNation’s inventory is at present up 112.4% for the previous 12 months, a meteoric rise seen by many such worth shares over the previous a number of months.
Discovering the Worth in Small Caps with AVUV
With the economic system in full-on restoration mode, U.S. small-cap worth shares stand to learn considerably, as elevated spending flows into numerous consumer-oriented industries. AutoNation is one such small-cap worth firm.
American Century Investments, partnering with Avantis Investments, affords the Avantis U.S. Small Cap Worth ETF (AVUV), an ETF that invests in firms with low valuation however excessive profitability ratios.
An actively managed ETF, AVUV combines the everyday advantages of following an index — diversification, low turnover and a transparency of exposures — with the pliability to seize worth actions as they occur.
For benchmarking functions, the fund makes use of the Russell 2000 Worth Index, which tracks the two,000 smallest capitalization shares of the bigger Russell 3000 Index, however the ETF doesn’t replicate this index.
AVUV’s portfolio managers use elementary screens akin to shares excellent, money move, bills, income and book-to-value to pick out shares. Smaller firms with excessive profitability are weighted extra closely than these with decrease returns and better costs.
As well as, AVUV can even put money into derivatives, akin to future contracts, forex forwards and swap agreements to realize publicity to equities and handle money move.
AVUV’s prime holding is AutoNation Inc at 0.90%, adopted by Cimarex Power Co. at 0.81%, and Goodyear Tire and Rubber Co at 0.80%.
A few of the prime sector allocations for the fund embody financials at 28%, client discretionary at 19%, industrials at 17%, as of finish of June.
AVUV has an expense ratio of 0.25%.
Learn extra on ETFtrends.com.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.