AVLV Is Up 24.5% While Filtering Out the Value Traps Other ETFs Miss

Most value ETFs simply screen for cheap stocks. The Avantis U.S. Large Cap Value ETF takes a different approach: it filters for stocks that are both cheap and profitable, a distinction that historically separates durable value from value traps. That dual screen is the core thesis behind AVLV, and whether it justifies owning it over simpler alternatives is the right question to ask.

What AVLV Is Built to Do

Avantis U.S. Large Cap Value ETF (NYSEARCA:AVLV) delivers large-cap value exposure with a profitability overlay. Rather than tracking a static index, Avantis uses a rules-based, factor-driven methodology that weights holdings by both valuation metrics (price-to-book, price-to-earnings) and profitability signals. The fund carries a 0.15% net expense ratio and holds $10 billion in net assets as of February 2026, making it a credible, liquid option in the factor ETF space.

The return engine is straightforward: cash flows and earnings growth from companies trading at discounted valuations, with no options overlays or derivatives. A 5% annual portfolio turnover rate signals a genuine buy-and-hold posture, not active trading dressed up as factor investing.

Does It Deliver?

AVLV’s profitability overlay appears to be earning its keep. Over the past year, the fund returned +24.5%, outpacing Vanguard Value ETF (NYSEARCA:VTV)’s +19.3% — a gap that reflects the benefit of filtering out cheap-but-deteriorating businesses. That outperformance is not coincidental; the quality screen systematically excludes companies with weak balance sheets that often drag down traditional value indexes.

That momentum has carried into 2026, with AVLV up +10.8% year-to-date — a stark contrast to the broader S&P 500, which has barely moved. Investors have rotated toward profitable cyclicals as rate expectations have stabilized, and AVLV’s factor tilt has positioned it squarely in that trade.

The profitability tilt appears to be earning its keep. Top holdings include Micron Technology (NASDAQ:MU), Exxon Mobil (NYSE:XOM), and Caterpillar (NYSE:CAT): companies that screen as cheap relative to earnings while generating strong returns on capital. The fund’s ~60% weighting in cyclical sectors (Industrials, Consumer Discretionary, Energy, Financials) has been a tailwind as the economy has remained resilient and the yield curve has normalized to a +0.61% spread between the 10-year and 2-year Treasury.

The Tradeoffs

AVLV’s heavy cyclical tilt is both its strength and its vulnerability. With roughly 60% in cyclicals, the fund is meaningfully exposed to economic slowdowns – if growth softens and the yield curve compresses again, this sector mix could underperform the broader market quickly. The fund’s 1.26% dividend yield is also modest, making it a total-return vehicle rather than an income tool.

Launched in September 2021, AVLV has not been tested through a full bear market or prolonged value underperformance cycle, making longer-term factor persistence harder to validate from its own history alone. The fund is structured as a core large-cap equity holding with value exposure and a quality filter built in, though its cyclical concentration means it has historically lagged during risk-off environments.