As 2024 draws to a close, investors can look back on a strong performance for U.S. stocks and look to 2025 with excitement. Of course, amid that positivity lies doubt. Concentration risk in U.S. stocks, specifically in areas like tech, looms over potential further positivity. At the same time, valuations remain particularly elevated. Those factors and potential positives abroad may speak to the case for emerging markets investing. The emerging markets ETF AVEM, specifically, can offer an appealing opportunity.
The Avantis Emerging Market Equity ETF (AVEM) has signaled some intriguing activity to close out 2024. In terms of positives, the strategy has added more than $1.5 billion in flows in the last six months, per ETF Database data. Its one year overall flows, meanwhile, see the strategy take second place in that metric among emerging market equity ETFs.
What’s more, the emerging markets ETF currently sits near “oversold” territory, according to technical analysis on YCharts. Its Relative Strength Index (RSI) sat at 34.38 as of December 30, very close to dropping below 30, signaling that it has been oversold.
The strategy charges a 33 basis point fee to actively invest in emerging market stocks of all market capitalizations. Its managers look to beat the MSCI Emerging Market IMI Index by applying active scrutiny to foreign firms. Specifically, AVEM seeks out small-cap foreign firms with strong profits and low valuations, underweighting large-cap names with lower profitability. According to Avantis Investors data, the strategy has returned 9.3% YTD against its market price, beating its benchmark by almost 2% overall.
Together, the active emerging markets ETF offers an appealing entry point into a potentially important market segment. With its active approach, it can adapt quickly to foreign events while also applying closer scrutiny to each firm’s fundamentals. In lower information foreign environments, especially among small cap names, that could prove a decisive advantage for those seeking diversification.
