Active management is gaining traction as investors navigate a market paradox where high valuations meet geopolitical uncertainty, according to Chris Davis, chairman and portfolio manager at Davis Advisors.
Key Takeaways:
- DUSA crossed $1 billion in assets with a portfolio of 26 stocks trading at 14 times earnings.
- The Iran conflict may raise normalized oil prices by $5 to $10 through increased infrastructure spending.
- DUSA outperformed the Russell 1000 Value index by approximately 600 basis points annually over the past decade.
Davis joined Nate Geraci on this week’s ETF Prime podcast to discuss the current market environment and the firm’s four-ETF lineup, which holds approximately $2.4 billion in assets. Davis Advisors manages $31 billion across ETFs, mutual funds, and separately managed accounts.
The Davis Select U.S. Equity ETF (DUSA) recently crossed $1 billion in assets, according to Davis. The concentrated portfolio holds just 26 stocks and trades at 14 times earnings compared to 24 to 25 times for the S&P 500.
Davis described the current market as an “unstable system” where enormous uncertainty coexists with near-record valuations. Investors face uncertainty around inflation, interest rates, and the Iran conflict, yet the market remains near all-time highs, he said.
The Iran situation could lead to sustained higher spending on energy infrastructure and exploration. According to Davis, this could potentially raise the normalized price of oil by $5 to $10. He recently visited energy companies in Texas and Canada and noted firms are rethinking supply redundancy.
Active Managers Can Navigate Disruption
On active versus passive investing, Davis argued that passive indices are “slow to respond to the future,” citing Kodak’s extended stay in the S&P 500 as an example. In fact, the film company remained in the index for years during its decline as digital photography disrupted its business. Active managers can better navigate disruption from artificial intelligence (AI), he said on the podcast.
DUSA has outperformed the Russell 1000 Value index by approximately 600 basis points per year over the last decade, according to Davis. In addition to DUSA, the firm’s other ETFs include the Davis Select Worldwide ETF (DWLD), the Davis Select Financial ETF (DFNL), and the Davis Select International ETF (DINT).
Davis emphasized that his family and partners are the largest investors in their own funds, aligning manager interests with shareholders.
Todd Sohn, chief ETF strategist at Strategas, also joined Geraci to discuss ETF flows topping $500 billion in the first three and a half months of 2026, new Nasdaq 100 filings from iShares and State Street, and Morgan Stanley’s launch of its spot Bitcoin ETF.
See more: Morgan Stanley Enters Bitcoin World With Low-Cost ETF
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