AVUVETF

The article argues that small-cap value stocks are now attractive investment opportunities after lagging during the AI boom. With small-cap earnings expected to grow over 20% year-over-year in Q3-Q4 2026 and trading at a low P/E ratio of 12, the author recommends the Avantis U.S. Small Cap Value ETF (AVUV) as the best way to capitalize on this trend, emphasizing its focus on profitable companies within the undervalued small-cap space.

The article recommends two ETFs for monthly investment of $500: the VanEck Semiconductor ETF (SMH), which has benefited from the AI boom with 89% returns over the past year and is expected to continue growing due to massive capex spending from hyperscalers; and the Avantis U.S. Small Cap Value ETF (AVUV), which trades at attractive valuations and is positioned to benefit from accelerating small-cap earnings growth expected around 20% in 2026.

Large-cap stocks are trading 10-19% above their historic valuations, making it difficult for value investors like Warren Buffett and Berkshire Hathaway to find attractive investment opportunities. However, small- and mid-cap value stocks are trading below their historic averages, presenting opportunities for retail investors that large institutions overlook due to capital deployment constraints.