In this episode of "Behind the Ticker," Brad Roth engages with Dodd Kittsley from Davis Funds to explore their ETFs and mutual funds. Kittsley brings a wealth of experience from his early involvement in the ETF industry in the late 1990s to his present position at Davis Funds, offering insights into the development of ETFs as tools for broadening market access.Davis Funds, founded in 1969, has evolved from focusing on institutional clients to offering mutual funds, SMAs, and ETFs, partnering with financial advisors to address investment strategies and investor behavior. The conversation highlights two particular ETFs: the Davis Select U.S. Equity ETF (DUSA) and the Davis Select Worldwide ETF (DWLD). DUSA aims for selective investment in undervalued, durable companies with effective management and potential for sustainable growth, adopting a Growth at a Reasonable Price (GARP) approach. DWLD, on the other hand, offers a global investment perspective, aiming to invest in the best businesses worldwide without geographic constraints.Kittsley emphasizes the role of deep research and a focus on long-term wealth over short-term earnings, advocating for a conviction-driven, actively managed approach. Beyond the professional insights, Kittsley shares personal interests in family activities, gardening, and sports, reflecting on the balance between personal life and professional commitments.This episode provides a comprehensive overview of Davis Funds' investment strategies, emphasizing the importance of informed, active management. For more information about Davis Funds and their approach to investment, their websites offer detailed resources for investors looking to understand the choices available in different investment vehicles.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Dodd Kittsley covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
It's such a great question because for some, looking at the portfolio, sector waiting's holding, it could be a bit of a headscratcher. But as you point out, it is 100% conviction weighted 100% conviction driven in terms of the, the holdings we have. We often will say we're benchmark agnostic and it's not to mean we don't care about our bogear, the benchmark or the opportunity set we're looking at, but we will never true up say a sector that we don't own.
He is with Davis Funds. They are a long-standing staple in a household name and investment management. They've done a fantastic job and a variety of different strategies. They have an extensive mutual fund and ETF lineup. However, today, we are going to focus on DUSA, the Select U.S. Equity ETF, as well as DWLD, the Davis Select Worldwide ETF. First of all, Dodd has an absolute wonderful guy. I enjoyed the little bit of time that I did spend with him.
Market Context and Positioning
So it's, it's really the epitome of what we do, right? It's, it's, it's, it's creating a best ideas portfolio that is incredibly selective. We believe that what you don't own is as important as what you do own particularly in this environment where money isn't free anymore interest rates are more normal in selectivity really matters. So Dusa has 22 to 23 holdings right now. And what we look for in that portfolio is stocks that are undervalued mispriced in the marketplace that are durable have very well capable management teams that can allocate capital well right cultures companies with competitive modes.
So that's, I think really where the case for active is, right? We have a process where certainly we'll screen for companies that are viable, but without knowledge of their management team, their competitors, their customers, their sustainable advantages, we wouldn't invest in this. So how are the portfolio waiting decisions made? Is that, you know, conviction by your management team or is there some other thing behind it to keep it more market cap-weighted? How are those waiting decisions come about?
It's like, well, we don't do that. We're not a mutual fund provider. But he thought about that. And that was that was the genesis of Davis advisors. Fast forward to the 2000s we got in the SMA business to provide choice. But on the same investment discipline, the same strategies, the same type of exposures that we did in mutual funds. And then in 2017, we got in the ETF business. And that was driven by the same questions from our clients.
Notable Insights
"I've been incredibly fortunate in my career to have stumbled on ETFs back in the late 90s, a time where there were 32 products less than $40 billion in assets and people didn't know the difference between an ETF and an EFT and an Exchange Funds."
"And I don't think the really the market recognized that this could be something that was for everybody, for the retail investor, the individual investor."
Key Takeaways
- The conversation explores important themes in etf industry relevant to today's advisor landscape.
- The conversation explores important themes in etf industry relevant to today's advisor landscape.
- The conversation explores important themes in etf industry relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Dodd Kittsley highlights important considerations around etf industry. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Dodd Kittsley, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.