In a recent webcast, Dodd Kittsley, director of ETF strategy at Davis Advisors, sat down with Cinthia Murphy, director of research at VettaFi, to unpack how active management is evolving — and where the Davis Select U.S. Equity ETF (DUSA ) fits into that shift.
Backdropped by concentrated markets and increasingly stretched valuations, the discussion highlighted a growing case for selective, fundamentals-driven investing.
The Rise of Active Management
The session opened by addressing the primary concerns of today’s investors: volatility and drawdowns. While the Magnificent Seven have historically driven market performance, Kittsley noted that many of the assumptions fueling their lofty valuations — such as maintaining 50% margins or 20% sales growth over a decade — have rarely been achieved by S&P 500 companies in the past.
This environment has sparked a renewed interest in active management. Kittsley argued that the ability to be nimble and forward-looking is critical during periods of massive transformation. Unlike passive indexing, active management allows for selectivity. In that case, “what you don’t own is as important as what you do own.”
A Concentrated Bet on Best Ideas
DUSA, an actively managed, high-conviction ETF, typically holds a concentrated portfolio of 25–26 stocks. Over a rolling three-year period, the fund has emerged as the top-performing large-cap value ETF, beating the Russell 1000 Value Index by more than 10 percentage points.
At the core of the strategy are a few defining principles:
- A broad view of value: Treating growth as a component of value, Davis Advisors builds the portfolio from the bottom up rather than anchoring it to a benchmark.
- Deep fundamental research: The team prioritizes deep, qualitative insight into management teams and company culture, aiming for a level of understanding that goes beyond what screens and models can capture.
- Resilience through cycles: Tested for their ability to weather downturns, holdings emphasize strong balance sheets and the potential to gain share in tougher environments.
- Alignment with investors: Davis Advisors maintains significant internal investment in its strategies, with billions in firm and family capital invested alongside clients.
DUSA recently surpassed $1 billion in assets under management, a milestone that underscores growing investor interest as value strategies regain momentum.
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