Can Savana’s Contrarian Strategy Withstand Ongoing Market Volatility and Meme-Stock Mania?

A Baptism by Fire for Savana’s US Small Caps ETF

Launched in November 2024, Savana Asset Management’s US Small Caps Active ETF (ASX – SVNP) entered the market at a time of heightened volatility and geopolitical uncertainty. Despite these challenges, the fund has navigated a turbulent landscape marked by a sharp 23% market drawdown followed by a robust 31% recovery by July 2025. This rollercoaster has effectively stress-tested the fund’s contrarian, algorithm-driven strategy, validating its core thesis of delivering asymmetric returns even in difficult conditions.

Investors who remained patient and held their positions through the downturn were rewarded, while those who reacted to the market’s volatility likely missed out on the subsequent rally. Savana’s experience underscores the value of conviction and discipline in volatile markets.

A Contrarian Strategy That Defends and Attacks

SVNP’s performance profile reveals a deliberate asymmetry – during negative market months, the ETF closely tracks its benchmark, underperforming by a mere 0.41%, effectively protecting capital. Conversely, in positive months, it outperforms by 2.02%, capturing significant upside. This dynamic stems from Savana’s value-first philosophy, which systematically targets companies where pessimism is already priced in, avoiding crowded trades and euphoric market sentiment.

The fund’s algorithmic approach leads it to invest in fundamentally sound but overlooked small-cap companies, often in legacy sectors or those facing idiosyncratic challenges. This strategy not only limits downside risk but also positions the portfolio for potential valuation re-ratings and compounding growth from strong cash flows.

Daring to Be Different – Low Overlap and High Conviction

Savana’s portfolio construction stands apart from peers, with less than 1% overlap with other US small-cap funds and a focus on higher conviction in fewer stocks. This concentrated approach contrasts with the overdiversification common among competitors, offering the potential for differentiated returns. The fund’s paper-trade simulation from mid-2022 to late 2024 showed a total return of 130.17% (AUD), significantly outperforming major peers.

By buying when others are selling and targeting deeply undervalued companies, Savana’s strategy exemplifies disciplined contrarian investing powered by algorithmic precision rather than human sentiment.

Kohl’s Corp – A Case Study in Contrarian Opportunity

One of the most illustrative examples of Savana’s approach is its early and sustained investment in Kohl’s Corp amid the resurgence of meme-stock mania in mid-2025. While retail traders drove speculative rallies in several heavily shorted stocks, Savana identified Kohl’s as fundamentally undervalued, trading at just 7.5x earnings with a significant real estate portfolio undervalued on the balance sheet.

Despite enduring a 64% share price decline after entry, Savana’s algorithms doubled down during periodic rebalances, lowering the average entry price. When Kohl’s stock surged 118% at its peak in July, the position became profitable, illustrating the fund’s ability to ride volatility and capitalize on market mispricings.

This disciplined contrarian stance highlights how Savana’s ETF can exploit opportunities that may be too volatile or counterintuitive for traditional investors.

Looking Ahead – Staying the Course Amid Market Noise

Savana cautions against reacting to short-term macroeconomic noise, emphasizing that markets have a proven capacity to self-correct over time through collective intelligence and decentralized decision-making. The firm’s strategy is designed to withstand hyperturbulence and information overload, focusing on long-term value creation rather than attempting to predict every market twist.

As geopolitical uncertainties continue, including the unpredictable influence of figures like Donald Trump, Savana’s message is clear – steadfast conviction and a differentiated, algorithmic approach may offer investors a resilient path forward.