GVAL Investment Case

Strategy Overview

Benjamin Graham and David Dodd are universally seen as the fathers of valuation and security analysis. In their 1934 book Security Analysis, they were early pioneers in comparing stock prices with earnings smoothed across multiple years, preferably five to 10 years. Robert Shiller popularized this method with his version of the cyclically adjusted price-to-earnings ratio (CAPE) in the late 1990s, and issued a timely warning of poor stock returns to follow in the coming years. The Cambria Global Value Index applies a similar valuation methodology across 45 markets and seeks outperformance by selecting markets based on relative and absolute valuation. Research performed by Cambria and set forth in Meb Faber's book Global Value: How to Spot Bubbles, Avoid Crashes, and Earn Big Returns in the Stock Market, shows that historically stock market returns are lower when starting valuations are high, and future returns are higher when starting valuations are low.

Fund Description

The Cambria Global Value ETF seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the Cambria Global Value Index. The Index consists of stocks with strong value characteristics. The Index begins with a universe of 45 countries located in developed and emerging markets. These countries include Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Morocco, the Netherlands, New Zealand, Norway, Peru, Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, the United States, and the United Kingdom. The Index next separates the top 25% of these countries as measured by Cambria's proprietary long term valuation metrics. The Index then screens stocks with market capitalizations over $200 million. The Index is comprised of approximately 100 companies.

Why Invest in GVAL

• Classic Value Investment Approach - A long-held pillar of value investing provides that investors should buy the stocks of companies that are trading below their intrinsic values. The GVAL portfolio invests in the top quartile of what the Cambria Global Value Index identifies as the cheapest markets in the world based on long term valuation metrics. This has the potential benefit of investing in classic value companies around the world that are trading at a discount to their intrinsic value.
• Breaking the Market Capitalization Link - One challenge of market cap investing is that market capitalization weighted indexes can expose the investor to overweighting overvalued companies. GVAL allows the investor to break the size and price link, and be agnostic as to the foreign and emerging markets in which to invest, so long as these markets are trading at low valuations.
• Removing Emotional Decision Making - One of the difficulties of investing in foreign countries is the inability to stay the course when geopolitical headlines are negative. The Cambria Global Value ETF rebalances into countries that are trading at low valuations, which often coincide with negative headlines and bear markets in such countries' stock indexes. GVAL gives the investor the potential benefit of owning securities in over-sold markets
• Protection Against Absolute Overvaluation - GVAL invests in the top 25% of countries based on long term valuation metrics, but also will move a portion or all of the portfolio to cash and bonds when individual markets do not pass absolute valuation filters.
• Diversification - The fund owns a broad portfolio of companies of different sizes, industries and sectors, and that are located in different developed and emerging countries, providing investors with a diversified equity portfolio with exposure to numerous low valuation countries.
• Advantage of Active ETFs - Investors will receive the benefits and flexibility of the ETF vehicle, including the ability to be traded using limit and stop loss orders as well as on margin, intraday pricing, transparency of holdings, lower expense ratio, and a single-share investment minimum, all underlying Cambria's risk- managed portfolio design.