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Small-cap stocks have been on a tear since last fall with the Russell 2000 enjoying the longest streak of monthly win since least December 1986, according to Dow Jones Market Data. This is because the index has been up for nine consecutive months, climbing 49% since the end of September. In comparison, the S&P 500 has risen 30% during the same period.
With millions of Americans now fully vaccinated and pandemic restrictions being rolled back, the U.S. economy is strongly recovering from the pandemic lows. Along with the largest vaccination drive, an expanded stimulus, a huge infrastructure package and a healing job market have resulted in speedy economic recovery and powered activities across all sectors and categories. This has led to an increase in consumer spending and confidence. Additionally, the return of corporate profits has bolstered investors’ optimism.
As small-cap companies are more domestically tied, these are poised to outperform when the economy improves. These pint-sized stocks generate most of their revenues from the domestic market, making them great choices during an uptrend. A low interest rate also bodes well for small-cap stocks as it pushes up economic activities and results in higher spending, thus boosting the domestically focused companies (read: Small-Cap ETFs to Play the Recovery in US Economy).
Further, concerns over rising inflation and lofty valuations in growth tech stocks have compelled investors to bet on the areas like small caps, which are poised to perform well amid an economic rebound.
Given this, there have been winners in several corners of the small-cap space. Below we have presented a bunch of ETFs that have easily crushed the Russell 2000 Index over the past year and should continue their strong performance at least in the near term.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report) – Up 137%
Energy prices are soaring on bullish demand and tightening supply. A swift global economic recovery and the reopening of economies have spurred energy demand. This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 33 stocks in its basket with AUM of $200.3 million. The fund trades in an average daily volume of 860,000 shares and charges 29 basis points in fees per year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Top Performing ETFs of the First Half).
Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 124.6%
Lithium prices are on the rise driven by heavy demand for lithium batteries, which is used in electric vehicles. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 38 securities in its basket with the Chinese firms taking the largest share at 48.9%, followed by United States (20.3%) and South Korea (9.6%). LIT charges investors 75 bps in annual fees and has amassed $3.8 billion in AUM. It trades in an average daily volume of 569,000 shares.
Revenue-weighted ETFs have outperformed their earnings counterparts over both the short and long-term periods, proving the credibility of the superior-weighting methodology. RWJ offers exposure to securities of the S&P SmallCap 600 but is weighted by revenues instead of market capitalization. It is home to 601 securities with the key holdings in consumer discretionary, industrials and financials. The ETF has AUM of $681.6 million and an expense ratio of 0.39%. It trades in an average daily volume of about 68,000 shares and has a Zacks ETF Rank #3 with a High risk outlook (read: 5 American ETFs That are Seeing Fireworks Post-Pandemic).
Cannabis stocks are soaring on a wave of wider legalization as well as the growing adoption of marijuana in more states. With AUM of $141.6 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 33 securities and charges 75 bps in annual fees. It trades in an average daily volume of 88,000 shares.
The consumer discretionary sector has been gaining from increasing consumer confidence about economic growth as well as rising spending. PSCD tracks the S&P SmallCap 600 Capped Consumer Discretionary Index, charging investors 29 bps in annual fees. It holds 89 securities in its basket with specialty retail taking the largest share at 37.5% while household durables, and hotels, restaurants and leisure account for a double-digit exposure each. The product has attracted $95.5 million in AUM and. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – Up 115.1%
This fund offers exposure to the companies having the highest "value scores" and "momentum scores" by tracking the S&P 600 High Momentum Value Index. It holds a basket of 121 stocks with AUM of $337.8 million and an average daily volume of 139,000 shares. Financials and consumer discretionary take the largest share at 27.6% and 23.4%, respectively, while industrials round off the next spot with a double-digit exposure. The ETF charges 39 bps in annual fees.
Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) – Up 106.6%
Inflationary pressure and a potential tax hike bodes well for the value stocks. This fund provides exposure to the pure value segment of the small-cap market by tracking the S&P SmallCap 600 Pure Value Index. It has a well-diversified portfolio of 167 stocks with key holdings in sectors like financials, consumer discretionary, industrials and materials. The product has been able to manage $363.8 million in its asset and charges 35 bps in fees per year from investors. It has a Zacks ETF Rank #3 with a High risk outlook (read: Value Investing Wins in 1H: 7 Best-Performing ETFs).
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Small-Cap ETFs That More Than Doubled in a Year
Small-cap stocks have been on a tear since last fall with the Russell 2000 enjoying the longest streak of monthly win since least December 1986, according to Dow Jones Market Data. This is because the index has been up for nine consecutive months, climbing 49% since the end of September. In comparison, the S&P 500 has risen 30% during the same period.
With millions of Americans now fully vaccinated and pandemic restrictions being rolled back, the U.S. economy is strongly recovering from the pandemic lows. Along with the largest vaccination drive, an expanded stimulus, a huge infrastructure package and a healing job market have resulted in speedy economic recovery and powered activities across all sectors and categories. This has led to an increase in consumer spending and confidence. Additionally, the return of corporate profits has bolstered investors’ optimism.
As small-cap companies are more domestically tied, these are poised to outperform when the economy improves. These pint-sized stocks generate most of their revenues from the domestic market, making them great choices during an uptrend. A low interest rate also bodes well for small-cap stocks as it pushes up economic activities and results in higher spending, thus boosting the domestically focused companies (read: Small-Cap ETFs to Play the Recovery in US Economy).
Further, concerns over rising inflation and lofty valuations in growth tech stocks have compelled investors to bet on the areas like small caps, which are poised to perform well amid an economic rebound.
Given this, there have been winners in several corners of the small-cap space. Below we have presented a bunch of ETFs that have easily crushed the Russell 2000 Index over the past year and should continue their strong performance at least in the near term.
Invesco S&P SmallCap Energy ETF (PSCE - Free Report) – Up 137%
Energy prices are soaring on bullish demand and tightening supply. A swift global economic recovery and the reopening of economies have spurred energy demand. This fund provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index. It holds 33 stocks in its basket with AUM of $200.3 million. The fund trades in an average daily volume of 860,000 shares and charges 29 basis points in fees per year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Top Performing ETFs of the First Half).
Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 124.6%
Lithium prices are on the rise driven by heavy demand for lithium batteries, which is used in electric vehicles. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 38 securities in its basket with the Chinese firms taking the largest share at 48.9%, followed by United States (20.3%) and South Korea (9.6%). LIT charges investors 75 bps in annual fees and has amassed $3.8 billion in AUM. It trades in an average daily volume of 569,000 shares.
Invesco S&P SmallCap 600 Revenue ETF (RWJ - Free Report) – Up 124.2%
Revenue-weighted ETFs have outperformed their earnings counterparts over both the short and long-term periods, proving the credibility of the superior-weighting methodology. RWJ offers exposure to securities of the S&P SmallCap 600 but is weighted by revenues instead of market capitalization. It is home to 601 securities with the key holdings in consumer discretionary, industrials and financials. The ETF has AUM of $681.6 million and an expense ratio of 0.39%. It trades in an average daily volume of about 68,000 shares and has a Zacks ETF Rank #3 with a High risk outlook (read: 5 American ETFs That are Seeing Fireworks Post-Pandemic).
Amplify Seymour Cannabis ETF (CNBS - Free Report) – Up 119.2%
Cannabis stocks are soaring on a wave of wider legalization as well as the growing adoption of marijuana in more states. With AUM of $141.6 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 33 securities and charges 75 bps in annual fees. It trades in an average daily volume of 88,000 shares.
Invesco S&P SmallCap Consumer Discretionary ETF (PSCD - Free Report) – Up 115.5%
The consumer discretionary sector has been gaining from increasing consumer confidence about economic growth as well as rising spending. PSCD tracks the S&P SmallCap 600 Capped Consumer Discretionary Index, charging investors 29 bps in annual fees. It holds 89 securities in its basket with specialty retail taking the largest share at 37.5% while household durables, and hotels, restaurants and leisure account for a double-digit exposure each. The product has attracted $95.5 million in AUM and. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – Up 115.1%
This fund offers exposure to the companies having the highest "value scores" and "momentum scores" by tracking the S&P 600 High Momentum Value Index. It holds a basket of 121 stocks with AUM of $337.8 million and an average daily volume of 139,000 shares. Financials and consumer discretionary take the largest share at 27.6% and 23.4%, respectively, while industrials round off the next spot with a double-digit exposure. The ETF charges 39 bps in annual fees.
Invesco S&P SmallCap 600 Pure Value ETF (RZV - Free Report) – Up 106.6%
Inflationary pressure and a potential tax hike bodes well for the value stocks. This fund provides exposure to the pure value segment of the small-cap market by tracking the S&P SmallCap 600 Pure Value Index. It has a well-diversified portfolio of 167 stocks with key holdings in sectors like financials, consumer discretionary, industrials and materials. The product has been able to manage $363.8 million in its asset and charges 35 bps in fees per year from investors. It has a Zacks ETF Rank #3 with a High risk outlook (read: Value Investing Wins in 1H: 7 Best-Performing ETFs).