Cambria Investment Management has rolled out an exchange-traded fund designed to provide exposure to the “most undervalued” developed and emerging market countries.
Mebane Faber, Chief Investment Officer, Cambria Investment Management.
Listed on the NYSE Arca, the Cambria Global Value ETF (GVAL) is linked to the Cambria Global Value Index, a proprietary index of 100 stocks from countries deemed to be the most undervalued by Cambria.
To be eligible for inclusion in the index, a company must be domiciled, trade in or have exposure to a market that is undervalued according to various valuation metrics including cyclically adjusted metrics. These valuation metrics are derived by dividing the current market value of a reference index or asset by an inflation-adjusted normalized factor (typically earnings, book value, dividends, cash flows or sales) over the past seven to 10 years.
The index uses systematic quantitative screens to attempt to avoid overvalued markets on both a relative and absolute level. In addition, the index incorporates screens to limit country, sector and industry concentration and to ensure liquidity and investability. These include a constituent minimum market capitalization of $200 million.
Broadly, the fund will invest in approximately 10 stocks from each of the countries included in the index. The countries currently included are Greece, Russia, Ireland, Hungary, Spain, Austria, Brazil, Czech Republic, Israel, Italy and Portugal. The fund will rebalance annually.
Mebane Faber, Cambria’s Chief Investment Officer, said: “A country’s long-term valuation metrics provide a useful picture of its true valuation. By looking at long-term valuation metrics, investors can avoid entering a market that’s highly overpriced and potentially a bubble … We believe long-term investors should seek a basket of countries trading at a discount to their intrinsic value.”
Eric Richardson, Cambria’s Chief Executive Officer, added: “GVAL is a strong addition to the suite of strategic-beta ETFs that we have already launched. Like the Cambria Shareholder Yield ETF (SYLD) and the [Cambria] Foreign Shareholder Yield ETF (FYLD), we seek to provide unique opportunities for investors through comprehensive research. Last year we launched one of the fastest growing ETFs, SYLD, and we intend to continue to launch innovative ETFs.”
The fund has total expenses of 0.69% and is Cambria’s fourth ETF.