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Should WisdomTree U.S. SmallCap ETF (EES) Be on Your Investing Radar?

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The WisdomTree U.S. SmallCap ETF (EES - Free Report) was launched on 02/23/2007, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Value segment of the US equity market.

The fund is sponsored by Wisdomtree. It has amassed assets over $604.67 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.78%.

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 Financials sector--about 24.50% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Mr Cooper Group Inc (COOP - Free Report) accounts for about 1% of total assets, followed by Boise Cascade Co (BCC - Free Report) and Flagstar Bancorp Inc (FBC - Free Report) .

The top 10 holdings account for about 6.33% of total assets under management.

Performance and Risk

EES seeks to match the performance of the WisdomTree U.S. SmallCap Earnings Index before fees and expenses. The WisdomTree U.S. SmallCap Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the small-capitalization segment of the U.S. Stock Market.

The ETF has lost about -13.80% so far this year and is down about -5.32% in the last one year (as of 05/03/2022). In the past 52-week period, it has traded between $44.35 and $53.68.

The ETF has a beta of 1.28 and standard deviation of 31.71% for the trailing three-year period, making it a medium risk choice in the space. With about 963 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, EES is a sufficient option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Value ETF (IWN - Free Report) and the Vanguard SmallCap Value ETF (VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $12.82 billion in assets, Vanguard SmallCap Value ETF has $25 billion. IWN has an expense ratio of 0.24% and VBR 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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