Positioning for What’s Next: Why Market Concentration Sets the Stage for Active Opportunity
By: Liz Goodier
October 24, 2025
Market concentration, valuation spreads, and uncertainty trends are shaping today’s investment landscape — our team talks about where we see long-term opportunities.
Summary points:
Active Management Faces a Historic Challenge
Only 22% of active managers have outperformed their benchmarks year-to-date through Q3—a potential two-decade low if year-end results hold.1
High fees and competition with passive strategies make consistent outperformance difficult in aggregate.
Why Active Management Still Matters
Some managers with differentiated strategies can outperform over the long term, despite short-term volatility.
Success often depends on concentrated portfolios, unique investment processes, and conviction outside the benchmark.
Constraints and Risk Limits Can Hurt Performance
Limits (i.e., sector caps, position restrictions) reduce the ability to take meaningful active positions.
Managers prioritizing short-term benchmark proximity may sacrifice long-term alpha.
The Dangers of Chasing Hot Trends
Many active managers chase momentum investments, like AI, which have produced record short-term returns.
Historical trends show that speculative bubbles eventually correct, emphasizing the need for a disciplined approach and long-term investing.
Innovation Cycles Require Patience
Breakthrough technologies (railroads, internet) often follow boom-and-bust patterns.
Investors benefit when managers focus on long-term potential rather than hype-driven opportunities.
Differentiated Strategies Drive Results
Strategies like Miller Value Partners Leverage ETF (ticker MVPL) seek to outperform broader markets while avoiding more extreme drawdowns than equivalent indexes. Please see important information about MVPL below.
Active managers who avoid benchmark hugging may be better positioned to generate alpha over time.
Patience Is Key for Investors
Top-performing managers often experience extended periods of underperformance.
Many investors undercut their returns by buying after gains and selling after losses.
Stick With Conviction
Identify managers whose thought process and strategy align with your investment philosophy.
Add to positions during down periods and trim when performance is ahead—resisting the urge to chase short-term trends.
Uncertainty Has Peaked, Not Persisted
After spiking to record highs earlier this year, the U.S. Economic Uncertainty Index has begun reverting toward historical averages.
While tariff fears may create short-term volatility, we believe uncertainty will trend lower over time, creating a more constructive backdrop for equities.
Market Leadership May Be Set to Broaden
Much like the Dot Com era, market concentration is extreme — the top 10 stocks now make up more than 40% of the S&P 500.
Historically, similar levels have preceded periods of outperformance for small- and mid-cap equities and value-oriented strategies.
Tech Valuations Look Stretched
The technology sector’s price-to-sales ratio is nearing 10x, compared to 7–8x during the dot-com peak.
The “Magnificent Seven” now trade at high valuations, suggesting high expectations that may be difficult to sustain as growth moderates and capital intensity increases.
Value Hiding in Plain Sight
By contrast, low-valuation equities across the S&P 400 and S&P 600 trade at 40–80% discounts to the broader market, offering compelling entry points for long-term investors.
We see mispriced opportunities in smaller-cap, lower-multiple stocks with strong free cash flow potential.
Small Caps at a Historic Discount
Small-cap stocks are near a 90-year trough in relative performance versus large caps — a setup similar to the early 2000s, when small caps went on to outperform for seven consecutive years.
With improving earnings trends, favorable rate dynamics, and attractive valuations, we view this as a multi-year opportunity.
Despite elevated market indices, valuation dispersion is at multi-decade highs, and true diversification now means looking beyond the benchmark. For patient investors and advisors seeking value, today’s overlooked areas may offer tomorrow’s strongest returns.
Comments dated 10/9/25 1Source: Bloomberg. Wall Street Momentum Traders Are Having the Best Run in Three Years. Article dated 10/3/2025
The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For the most recent month-end performance, please call 888.593.5110 or visit the Fund’s website at millervaluefunds.com
Miller Value Partners Leverage ETF (MVPL) Principal Investment Strategies: When the Fund is in a leveraged position, the Fund invests in Leveraged ETFs that seek daily leveraged exposure equal to 200% of the S&P 500® Index (the “S&P 500 Index,” or the “Index”). As a result, when the Fund is in a leveraged position, the Fund may be riskier than alternatives that do not use leverage because the objective of the Leveraged ETFs in which the Fund invests is to magnify the daily performance of the Index. When the Fund is in a leveraged position, the return of the Fund for periods longer than a single day will be the result of the Leveraged ETFs’ return for each day compounded over the period. The Fund expects that it will be invested in a Leveraged ETF for periods greater than one day when the Adviser’s trading signals so indicate. As a result, the Fund will be subject to the risks of compounding that affect investments in Leveraged ETFs, and the Fund’s returns during such a period are consequently expected to differ from 200% of the daily return of the Leveraged ETF. For periods longer than a single day, the Fund will lose money if the Underlying ETF’s performance is flat, and it is possible that the Fund will lose money even if the value of the Index rises. This effect can be magnified in volatile markets. Consequently, these investment vehicles may be extremely volatile and can potentially expose the Fund to complete loss of its investment. Longer holding periods, higher volatility of the Index, and leveraged exposure each increase the impact of compounding on an investor’s returns. During periods in which the Index experiences higher volatility, that volatility may affect the Leveraged ETFs’ returns, and the Fund’s return as a result, as much as or more than the return of the Index. Although the Fund, when in a leveraged position, invests in Leveraged ETFs that seek daily leveraged exposure equal to 200% of the Index, the Fund does not target a specific level of leverage over any time period that is more than a single day. Rather, the Fund opportunistically uses leverage in seeking to achieve its objective of capital appreciation over a multi-year horizon. On a daily basis, Investors may check the Fund’s holdings on this website to see whether the Fund is in a leveraged or unleveraged position.
The US Policy Uncertainty Index measures policy-related economic uncertainty using three underlying components: news coverage, federal tax code provisions, and the Federal Reserve’s Survey of Professional Forecasters. The S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks. Price to sales ratio is a tool for calculating a stock’s valuation relative to other companies. It is calculated by dividing a stock’s current price by its revenue per share. The Mag 7 or Magnificent 7 are a group of companies in the U.S. stock market: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla. The S&P MidCap 400® Value measures constituents from the S&P MidCap 400 that are classified as value stocks based on three factors: the ratios of book value, earnings and sales to price. The S&P 600 SmallCap Value Index tracks the value stocks in the S&P 600 SmallCap Index, identified by three factors: book value, earnings and sales to price. Free cash flow is earnings before depreciation, amortization, and non-cash charges minus maintenance capital expenditures. Alpha is a measure of the excess return a portfolio or investment generates relative to its benchmark, after adjusting for risk.
Investors cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.
Investing involves risk, including possible loss of principal. The Fund’s return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund’s investments are concentrated in or have significant exposure to a particular issuer, industry or group of industries, or asset class, the Fund may be more vulnerable to adverse events affecting such issuer, industry or group of industries, or asset class than if the Fund’s investments were more broadly diversified. Issuer-specific events, including changes in the financial condition of an issuer, can have a negative impact on the value of the Fund.
Shares of any ETF are bought a sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
The Fund will be exposed to additional risks as a result of its investments in the securities of small and medium capitalization companies. Small and medium cap companies may fall out of favor with investors; may have limited product lines, operating histories, markets or financial resources; or may be dependent upon a limited management group.
The prices of securities of small and medium capitalization companies generally are more volatile than those of large capitalization companies. Diversification cannot assure a profit or protect against loss in a down market.
Mutual funds, equities, bonds, and other asset classes have different risk profiles, which should be considered when investing. Investors cannot directly invest in an index. ETFs that the Fund may invest in are subject to market, economic, and business risks that may cause their prices to fluctuate. Shareholders will pay higher expenses than would be the case if making direct investments in the underlying ETFs. Because the Fund invests in ETFs, it is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of an ETF’s shares may trade at a discount to its net asset value (“NAV”), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Fund’s ability to sell its shares.
Mutual fund investing involves risk; principal loss is possible. Equity securities are subject to price fluctuation and possible loss of principal. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. Real estate investment trusts (REITs) are closely linked to the performance of the real estate markets. REITs are subject to illiquidity, credit and interest rate risks, and risks associated with small and mid-cap investments. Asset-backed, mortgage-backed or mortgage-related securities are subject to prepayment and extension risks. Investments in MLP securities are subject to unique risks, including the risks of MLPs and the energy sector, including the risks of declines in energy and commodity prices, decreases in energy demand, adverse weather conditions, natural or other disasters, changes in government regulation, and changes in tax laws.
A new or smaller fund is subject to the risk that its performance may not represent how the fund is expected to or may perform in the long term. In addition, new funds have limited operating histories for investors to evaluate and new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies.
The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. References to specific securities are for illustrative purposes only. Portfolio composition is shown as of a point in time and is subject to change without notice.
The views expressed in this commentary reflect those of the author as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. These views are not intended to be a forecast of future events, a guarantee of future results or investment advice. Data from third-party sources cited herein is believed to be reliable, but may not have been independently audited by Miller Value Partners.
The Miller Value Funds are distributed by Quasar Distributors, LLC.
JNK seeks to provide a diversified exposure to US dollar-denominated high yield corporate bonds with above-average liquidity. The ETF invests exclusively in bonds, whereas the Miller Income Fund has flexibility to invest across asset classes. Miller Income Fund is weighted 10% in bonds and 90% in equities as of 9/30/25.
The JNK ETF was selected due to its passive indexing of high yield indexes investment objectives and their dominant position in the category based on AUM. Investors looking for high yield strategies may consider this ETF or the Miller Income Fund.
SPDR Bloomberg High Yield Bond ETF (JNK)
Annualized Performance as of 9/30/25
1-Year
3-Year
5-Year
10-Year
NAV
7.08%
10.67%
4.72%
5.07%
Market Value
7.08%
10.84%
4.73%
5.05%
Past performance is not a reliable indicator of future performance. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. Performance of an index is not illustrative of any particular investment. All results are historical and assume the reinvestment of dividends and capital gains. It is not possible to invest directly in an index.
Performance returns for periods of less than one year are not annualized. Performance is shown net of fees.
Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.
The market price used to calculate the Market Value return is the midpoint between the highest bid and the lowest offer on the exchange on which the shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. If you trade your shares at another time, your return may differ.
Gross Expense Ratio: 0.40%
Please reference the prospectus for detailed information.
