A $11 Billion ETF Quietly Outperforms the Total Market by Favoring Profitable Stocks

Most broad U.S. equity ETFs hand the biggest positions to the biggest companies, regardless of whether those companies are cheap or profitable. Avantis U.S. Equity ETF (NYSEARCA:AVUS | AVUS Price Prediction) takes a different approach: it tilts the portfolio toward stocks that score well on both value and profitability, the two factors academic research most consistently links to long-run outperformance. That distinction is subtle on the surface but meaningful over a full market cycle.

What AVUS Is Designed to Do

AVUS occupies a middle ground sometimes called “systematic active” or enhanced indexing. Avantis, a subsidiary of American Century, screens the broad U.S. market and overweights companies trading at lower valuations relative to their fundamentals while emphasizing firms with strong current profitability. The result is a diversified, 500+ holding portfolio that resembles the total market but with deliberate factor tilts built in.

The return engine here is factor exposure, not market-cap momentum. By systematically favoring profitable, reasonably priced companies, AVUS aims to capture a return premium over a pure cap-weighted index across long time horizons. At 0.15% in annual expenses and just 1% portfolio turnover, the strategy is designed to be tax-efficient and low-cost, which matters when compounding over decades.

Does It Deliver?

AVUS has meaningfully outpaced its benchmark over both short and long horizons. Over the past year, AVUS returned 19.88% compared to 15.22% for Vanguard Total Stock Market ETF (NYSEARCA:VTI) — a gap driven largely by the value and profitability tilts paying off as rate-sensitive investors rotated toward cheaper, cash-generative businesses. That outperformance is not a one-year anomaly. Over five years, AVUS has compounded at 87.59% versus 68.86% for VTI, suggesting the factor premium has been durable rather than episodic and that the strategy’s tilt toward profitable, reasonably priced companies has added consistent value across different market environments.

The $11.1 billion in AUM reflects broad institutional and retail confidence in the strategy, though factor tilts can lag for extended stretches before delivering.

The Tradeoffs

AVUS still carries meaningful tech concentration. The top five holdings represent roughly 20.4% of the portfolio, and Information Technology is the largest sector at 22.6%. Investors expecting a deep value tilt away from mega-cap tech will find AVUS less aggressive than pure value ETFs. The factor premium is also not guaranteed in any given period — value and profitability tilts underperformed significantly during the 2017–2020 growth dominance era, requiring multi-decade patience.

On the income side, the fund’s 1.04% dividend yield is modest relative to the 10-year Treasury’s 4.03%, making AVUS a pure total-return vehicle rather than a defensive or income-generating one.