The Aegis Value Fund No Load Is On Top Of The Small Value Food Chain

| About: Aegis Value (AVALX)

Summary

The Aegis Fund No Load is the top-performing fund in the Small Value Category with a spectacular YTD Return of 43.88%.

The fund has benefited from its portfolio weight advantages in the basic materials and energy sectors.

The fund also benefits from a lack of exposure to the financial services sector, especially in the foreign and global sectors.

The Aegis Value Fund No Load (MUTF:AVALX) is the top-ranked fund in Morningstar's Small-Value Category. In terms of outperformance, the fund's YTD Return as compared to its benchmarks is eye-popping at best. As of 6/17/16, the fund's return is 43.88% while the S&P 500 and Morningstar Small Value Category returns is 4.30%.

When one looks at the fund's market capitalization, one can immediately notice the fund's overwhelming portfolio weight advantage in micro-cap holdings. As a result, the fund has portfolio weight deficits in the small-cap and mid-cap areas. The portfolio market capitalization statistics of the fund can be seen below:

Size

% of Portfolio

Benchmark

Category Avg.

Giant

0.00

0.00

0.00

Large

0.00

0.00

0.47

Medium

3.01

8.33

17.63

Small

22.71

56.08

72.49

Micro

74.28

35.58

9.40

Click to enlarge

When one looks at the fund's sector weightings, one can see an overwhelming portfolio weight advantage in the basic materials sector. The fund has a solid advantage in the energy sector. Here are the fund's basic materials and energy portfolio weightings as compared to their benchmarks.

Sector

AVALX Stocks

Benchmarks

Category Avg.

Basic Materials

43.75

3.72

6.41

Energy

13.99

3.73

4.62

Click to enlarge

The PowerHouses S&P Small-Cap Materials Portfolio ETF (NASDAQ:PSCM) has a 10.8% YTD Return for the year. It is third among U.S. Sectors in terms of sector performance. Given that the fund has nearly 33% of its holdings in international stocks, it is important to measure the performance of this sector overseas. The iShares Global Materials ETF's (NYSEARCA:MXI) sector performance is 9.6% while the SPDR S&P International Materials Sector (NYSEARCA:IRV) is 6.0%.

As we can see in the graph below, the basic materials holdings of the Aegis Value Fund No Load have boosted this fund tremendously. Out of 23 basic materials holdings, 19 of them have a positive YTD Return in 2016.

Basic Materials Holding

YTD Return

Resolute Forest Products Inc.

-32.36%

Olympic Steel Inc.

120.29%

Coeur Mining Inc.

275.00%

Nevsun Resources Ltd.

5.19%

Mercer International Inc.

-8.56%

Alamos Gold Inc.

122.04%

Guyana Goldfields Inc.

205.19%

Dalradian Resources Inc.

26.58%

Lake Shore Gold Corp.

85.71%

Universal Stainless & Alloy Products Inc.

23.57%

Endeavour Mining Corp.

168.55%

Geodrill Ltd.

147.46%

Continental Gold Inc.

100.64%

Avino Silver & Gold Mines Ltd.

150.81%

Dundee Precious Metals Inc.

157.81%

Cloud Peak Energy Inc.

-1.44%

Amerigo Resources Ltd.

-26.83%

TMAC Resources Inc.

179.17%

Goldquest Mining Corp.

206.67%

Perseus Mining Ltd.

86.15%

Bracell Ltd.

96.67%

Aurico Metals Inc.

58.83%

Timmins Gold Corp.

118.42%

Sulliden Mining Capital Inc.

56.00%

Click to enlarge

Most of the fund's energy sector holdings are from U.S.-based companies. The PowerShares S&P SmallCap Energy Portfolio ETF has a 6.9% YTD Return. Six out of eight energy stocks have a positive YTD return. Thus, the fund's energy sector holdings have boosted the performance of this fund towards the outstanding results that it currently enjoys.

Energy Holding

YTD Return

WPX Energy Inc Class A

65.16%

McDermott International Inc.

40.30%

Parker Drilling Co.

29.67%

Gulfmark Offshore Inc.

-14.99%

Deep Down Inc.

85.87%

Paragon Offshore PLC.

814.89%

Questerre Energy Corp.

8.47%

Comstock Resources Inc.

-50.11%

Click to enlarge

The fund also has a significant deficit in the financial services sector. The fund's deficit in financial services holdings is a great call given the performances of the financial services sector in U.S Small-Cap, foreign sector, and global sector ETFS. The PowerShares S&P SmallCap Financials Portfolio ETF has a 3.2% YTD Return.

This is the second-to-worst performing U.S Small-Cap ETF. The iShares Global Financials ETF has a -7.3% YTD Return while the S&P International Financial Sector ETF has a -12.3% YTD Return. These two ETFS are the worst performing ETFS in the foreign and global sector, respectively.

Thus, the Aegis Value Fund No Load benefits from lack of exposure to financial holdings. Here is the fund's deficit in financial holdings as compared to its benchmarks.

Sector

AVALX Stocks

Benchmarks

Category Avg.

Financial Services

4.24

27.14

23.40

Click to enlarge

HOWEVER…

Investors will have to pay a pretty penny for this fund. The Aegis Value Fund No Load's expense ratio is 1.50 as of the fund's 4/30/16 prospectus. The fund's expense ratio has consistently been higher than its benchmark. It is well above the fee level group comparison median.

Click to enlarge

CONCLUSION

I'm in favor of giving this fund a chance. In spite of the fund's pricey expense ratio, the Aegis Value Fund No Load's outperformance is almost impossible to ignore. The fund's tremendous advantage in basic materials holdings has boosted the fund tremendously. The fund's performance was also boosted by their advantage in their energy holdings sector.

Furthermore, the fund is boosted by its lack of exposure to the poor-performing financial services sector. There is no doubt that this major differentiator has accelerated the fund's performance so far in 2016.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.