GVAL: The Ultimate Rebound Play On Europe And Emerging Markets

It’s an old joke among value investors that none of us are ever “wrong.” We’re just “early.”

There is actually a lot of truth to that statement. It’s rare to find a good value investor who is also a good market timer. (It’s also hard to find good market timers—period—but that’s a different story for a different day.) A cheap stock can stay cheap for longer than you expect—as can entire markets—but over time, value strategies have proven to outperform.

This brings me to one of my favorite long-term ETF holdings, the Cambria Global Value ETF (GVAL).

Cambria’s timing could have been a little better. They launched GVAL—an ETF that invests in non-U.S. value stocks—in March of last year. This was just months before emerging markets and non-U.S. developed markets (i.e. everything that GVAL owned at the time) rolled over and gave up substantially all of their gains for the year.

GVAL was launched at $25 per share and bottomed out at $18.80 early in January of this year—generating losses of 25% in about 9 months.


GVAL has gotten off to a humble start. But if you’re a believer in value investing as a discipline, then GVAL deserves a serious look. In a market in which the U.S. has outpaced its foreign competitors for years, I consider GVAL to be an excellent, diversified rebound play on Europe and emerging markets.

Let’s take a look under the hood.  In building GVAL’s portfolio, Cambria starts with a universe of 45 world markets and reduces this to the cheapest 25% as ranked by Cambria’s models. Cambria’s methodology is based mostly on the cyclically-adjusted price/earnings ratio (“CAPE”), a metric used by Benjamin Graham and made famous more recently by Yale Professor Robert Shiller.

From these cheapest 25% of world markets, Cambria then builds a portfolio of about 100 stocks with market caps over $200 million. The result is a global mid-cap value portfolio of stocks in countries where investors might normally be scared to tread.

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Disclosure: Long GVAL.

Disclaimer: This post is for informational purposes only and should not be considered specific investment advice or as a solicitation to buy or sell any securities.

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