Original content below published June 21, 2016.
An interesting tidbit of information. On the day after the President-elect Trump was elected Nov. 6, 2024, U.S. small value cap stocks enjoyed a surge because of the expectation that smaller companies which have a higher percentage of their revenue occurring in the USA vs. international, would benefit from policies that are design to bring more economic activity to the USA. Our favorite way to invest in US Small Cap Value is the ETF symbol DFSV managed by DFA. Another fine way to invest in this asset class is Vanguard’s ETF symbol VBR. By the way, as of recent reports, DFSV has 993 stocks whereas VBR has 885. VBR follows an index. The manager is judged based on doing a good job tracking the index. DFSV does not have to rigidly follow any index. They make sure they get to most thorough expose to the attributes of “small” and “value”. Because small and value lead to greater returns, DFSV has a slightly greater “tilt” toward small and value.
On November 6, 2024
VBR: +4.5%
DFSV: +7.0%
I am not suggesting any conclusions that can be made from one day’s information.
As I look at the market today, Veteran’s Day, 11/11/2024 at 943 am, DFSV+1.89%, VBR +1.37%
grofW
Numbers
Small beats Large, Value beats growth! So "small cap value" should perform well. Let's hold a little contest! Who will win? We chose the time period of 1/1/1999 to 4/30/16 - over 17 years of data.DFA? (DFA US Small Cap Value - DFSVX)Vanguard? (Vanguard Small Cap Value Index Fund - VISVX)The indexes? (Russell 2000, Russell 2000 Value/Growth, US Large Growth)The results were exactly as we would have guessed. DFA came out on top (10.5%) followed by Vanguard (9.3%), Russell 2000 Value (8.5%), Russell 2000 (7.3%), Russell 2000 Growth (5.6%) and finally, as expected, large cap growth index at the bottom (5.0%). We ran the study over the 17+ years from 1/1/1999 to 4/30/16.Let me also point out that a fund outperforming their most relevant index over 17 years (even one year) is very unusual and points out why we rank DFA #1 and Vanguard #2 across all finds families.The trend chart looks like this. (click it to see it larger)The numbers look like this. (click it to see it larger)Why did DFA win? DFA provides a greater tilt towards small and value. Another is that DFA uses techniques to overcome the large bid ask spread that exists for very small thinly traded stocks. Finally DFA also utilizes the profitability premium, which joins small and value as one of the pervasive market premiums available to investors.