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Should iShares Morningstar SmallCap Growth ETF (JKK) Be on Your Investing Radar?

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Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the iShares Morningstar SmallCap Growth ETF (JKK - Free Report) , a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $253.24 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Also, growth stocks are a type of equity that carries more risk compared to others. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.30%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.25%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 25.70% of the portfolio. Healthcare and Consumer Discretionary round out the top three.

Looking at individual holdings, Match Group Inc (MTCH - Free Report) accounts for about 2.69% of total assets, followed by Quidel Corp (QDEL - Free Report) and Solaredge Technologies Inc (SEDG - Free Report) .

The top 10 holdings account for about 11.77% of total assets under management.

Performance and Risk

JKK seeks to match the performance of the Morningstar Small Growth Index before fees and expenses. The Morningstar Small Growth Index measures the performance of stocks issued by small-capitalization companies.

The ETF return is roughly 13.90% so far this year and it's up approximately 20.47% in the last one year (as of 08/19/2020). In the past 52-week period, it has traded between $142.18 and $242.93.

The ETF has a beta of 1.22 and standard deviation of 26% for the trailing three-year period, making it a medium risk choice in the space. With about 241 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar SmallCap Growth ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, JKK is a great option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 Growth ETF (IWO - Free Report) and the Vanguard SmallCap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $9.21 billion in assets, Vanguard SmallCap Growth ETF has $11.30 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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