BSVO: Quality A Concern For This Deeply Discounted Active Small-Cap ETF

2025-04-29 05:40:01 ET

Summary

• The EA Bridgeway Omni Small-Cap Value ETF trades at an ultra-low 0.40x P/S ratio and has a $1.24 weighted average market cap, indicating extreme exposure to the size and value factors.
• BSVO holds over 550 stocks across 101 unique GICS sub-industries, though like many of its peers, it's highly concentrated in Regional Banks, which comprise one quarter of the fund.
• Quality is also a major issue. Using Seeking Alpha Factor Grades, I determined BSVO's quality is the third-lowest among the nearly 700 U.S. Size & Style ETFs I track.
• Research from the Ken French Data Library highlights the drawbacks of BSVO's low-quality approach. While strong returns are possible, the risks are skewed to the downside.
• Overall, I don't like the approach, but this article also highlights BSVO's performance and fundamentals against four alternatives, two of which I'm confident are better buys in the long term.

Investment Thesis

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