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The small-cap space has regained momentum lately as investors switch to the space for bargain hunting. This is especially true as small-cap stocks have been beaten down badly in the market sell-off this year triggered by skyrocketing inflation, Russia’s invasion into Ukraine and Fed’s aggressive tightening policy.
While there are many ETFs that have declined, we have highlighted five that have a lower P/E ratio and a Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Roundhill Acquirers Deep Value ETF (DEEP - Free Report) , Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) , WisdomTree SmallCap Earnings ETF (EES - Free Report) , Vanguard Small-Cap Value ETF (VBR - Free Report) and SPDR S&P 600 Small Cap ETF .
Inside the Latest Momentum
The Russell 2000 Index has plunged 24% from its November record compared to the S&P 500 Index, which has declined 13% in the same time period. After the massive decline, small-cap stocks have become inexpensive. The Russell 2000 traded at 12.5 times its projected earnings at the end of April over the next 12 months, below the average of 15.4 times since 1985, according to BofA. This valuation puts the small-cap benchmark at its cheapest relative to the large-cap Russell 1000 since 2001.
As small-cap companies are more domestically tied, these are poised to outperform when the economy improves. With slowing inflation report and rounds of strong earnings from some of the retailers, the stock market has renewed its strength. Additionally, the latest Fed minutes rekindled some interest in the stock market. The minutes showed that the central bank would continue raising interest rates by half a percentage point each in June and July to combat surging inflation and avoid an economic downturn (read: Fed Minutes Rekindle Optimism: 5 ETFs That Surged the Most).
The initial phase of the rate increase will be good for stocks as it will reflect an improving economy. These pint-sized stocks generate most of their revenues from the domestic market, making them great choices during an uptrend. Since its 2022 closing low on May 11, the Russell 2000 has gained 8%, while the S&P 500 has added 4.2%.
Roundhill Acquirers Deep Value ETF (DEEP - Free Report) – P/E Ratio 10.60
Roundhill Acquirers Deep Value ETF is designed to offer retail and institutional investors exposure to deeply undervalued stock, seeking to provide investment results that measure the performance of the Acquirers Deep Value Index. It holds 99 stocks in its basket, with each accounting for less than 1.9% share.
Roundhill Acquirers Deep Value ETF has amassed $47.4 million in its asset base while trades in an average daily volume of 5,000 shares. It charges 80 bps in annual fees and has a Zacks ETF Rank #3.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – P/E Ratio 11.59
Invesco S&P SmallCap Value with Momentum ETF offers exposure to the companies having the highest "value scores" and "momentum scores" by tracking the S&P 600 High Momentum Value Index. XSVM holds a basket of 121 stocks, each making up for no more than 3.1% share. Invesco S&P SmallCap Value with Momentum ETF has a double-digit allocation each in financials, industrials, consumer discretionary and materials (read: 5 Value ETFs to Buy Now for Outperformance).
Invesco S&P SmallCap Value with Momentum ETF has AUM of $716.1 million and an average daily volume of 183,000 shares. XSVM charges 39 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
WisdomTree SmallCap Earnings ETF targets earnings-generating small-cap companies by tracking the WisdomTree U.S. SmallCap Index. Holdings 963 stocks in its basket, the ETF provides a nice balance across various securities as each firm holds less than 1.4% share in the basket. Financials, industrials, and consumer discretionary are the top sectors with double-digit exposure each.
WisdomTree SmallCap Earnings ETF has amassed $610 million in its asset base and sees moderate volume of around 116,000 shares per day. It charges 38 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard Small-Cap Value ETF (VBR - Free Report) – P/E Ratio 13.30
Vanguard Small-Cap Value ETF offers exposure to the value corner of the small-cap space and follows the CRSP US Small Cap Value Index. It holds 926 securities in its basket and charges 7 bps in annual fees. Financials, industrials, and consumer discretionary are the top three sectors with double-digit exposure each.
Vanguard Small-Cap Value ETF trades in moderate volume of about 631,000 shares a day and has amassed $25 billion in its asset base. It has a Zacks ETF Rank #1 with a Medium risk outlook
SPDR S&P 600 Small Cap ETF – P/E Ratio 14.74
SPDR S&P 600 Small Cap ETF tracks the S&P SmallCap 600 Index, holding 602 stocks in its portfolio. It is widely spread across sectors, with financials, industrials, information technology, consumer discretionary, and healthcare making up a double-digit exposure each (read: Should You Buy the Dip in Small-Cap ETFs Now?).
SPDR S&P 600 Small Cap ETF has been able to manage $1.8 billion in its asset base while trading in a lower volume of 117,000 shares a day on average. It charges 15 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
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5 Small-Cap ETFs Trading at a Discount
The small-cap space has regained momentum lately as investors switch to the space for bargain hunting. This is especially true as small-cap stocks have been beaten down badly in the market sell-off this year triggered by skyrocketing inflation, Russia’s invasion into Ukraine and Fed’s aggressive tightening policy.
While there are many ETFs that have declined, we have highlighted five that have a lower P/E ratio and a Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Roundhill Acquirers Deep Value ETF (DEEP - Free Report) , Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) , WisdomTree SmallCap Earnings ETF (EES - Free Report) , Vanguard Small-Cap Value ETF (VBR - Free Report) and SPDR S&P 600 Small Cap ETF .
Inside the Latest Momentum
The Russell 2000 Index has plunged 24% from its November record compared to the S&P 500 Index, which has declined 13% in the same time period. After the massive decline, small-cap stocks have become inexpensive. The Russell 2000 traded at 12.5 times its projected earnings at the end of April over the next 12 months, below the average of 15.4 times since 1985, according to BofA. This valuation puts the small-cap benchmark at its cheapest relative to the large-cap Russell 1000 since 2001.
As small-cap companies are more domestically tied, these are poised to outperform when the economy improves. With slowing inflation report and rounds of strong earnings from some of the retailers, the stock market has renewed its strength. Additionally, the latest Fed minutes rekindled some interest in the stock market. The minutes showed that the central bank would continue raising interest rates by half a percentage point each in June and July to combat surging inflation and avoid an economic downturn (read: Fed Minutes Rekindle Optimism: 5 ETFs That Surged the Most).
The initial phase of the rate increase will be good for stocks as it will reflect an improving economy. These pint-sized stocks generate most of their revenues from the domestic market, making them great choices during an uptrend. Since its 2022 closing low on May 11, the Russell 2000 has gained 8%, while the S&P 500 has added 4.2%.
Roundhill Acquirers Deep Value ETF (DEEP - Free Report) – P/E Ratio 10.60
Roundhill Acquirers Deep Value ETF is designed to offer retail and institutional investors exposure to deeply undervalued stock, seeking to provide investment results that measure the performance of the Acquirers Deep Value Index. It holds 99 stocks in its basket, with each accounting for less than 1.9% share.
Roundhill Acquirers Deep Value ETF has amassed $47.4 million in its asset base while trades in an average daily volume of 5,000 shares. It charges 80 bps in annual fees and has a Zacks ETF Rank #3.
Invesco S&P SmallCap Value with Momentum ETF (XSVM - Free Report) – P/E Ratio 11.59
Invesco S&P SmallCap Value with Momentum ETF offers exposure to the companies having the highest "value scores" and "momentum scores" by tracking the S&P 600 High Momentum Value Index. XSVM holds a basket of 121 stocks, each making up for no more than 3.1% share. Invesco S&P SmallCap Value with Momentum ETF has a double-digit allocation each in financials, industrials, consumer discretionary and materials (read: 5 Value ETFs to Buy Now for Outperformance).
Invesco S&P SmallCap Value with Momentum ETF has AUM of $716.1 million and an average daily volume of 183,000 shares. XSVM charges 39 bps in annual fees and has a Zacks ETF Rank #3 (Hold).
WisdomTree SmallCap Earnings ETF (EES - Free Report) – P/E Ratio 11.59
WisdomTree SmallCap Earnings ETF targets earnings-generating small-cap companies by tracking the WisdomTree U.S. SmallCap Index. Holdings 963 stocks in its basket, the ETF provides a nice balance across various securities as each firm holds less than 1.4% share in the basket. Financials, industrials, and consumer discretionary are the top sectors with double-digit exposure each.
WisdomTree SmallCap Earnings ETF has amassed $610 million in its asset base and sees moderate volume of around 116,000 shares per day. It charges 38 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
Vanguard Small-Cap Value ETF (VBR - Free Report) – P/E Ratio 13.30
Vanguard Small-Cap Value ETF offers exposure to the value corner of the small-cap space and follows the CRSP US Small Cap Value Index. It holds 926 securities in its basket and charges 7 bps in annual fees. Financials, industrials, and consumer discretionary are the top three sectors with double-digit exposure each.
Vanguard Small-Cap Value ETF trades in moderate volume of about 631,000 shares a day and has amassed $25 billion in its asset base. It has a Zacks ETF Rank #1 with a Medium risk outlook
SPDR S&P 600 Small Cap ETF – P/E Ratio 14.74
SPDR S&P 600 Small Cap ETF tracks the S&P SmallCap 600 Index, holding 602 stocks in its portfolio. It is widely spread across sectors, with financials, industrials, information technology, consumer discretionary, and healthcare making up a double-digit exposure each (read: Should You Buy the Dip in Small-Cap ETFs Now?).
SPDR S&P 600 Small Cap ETF has been able to manage $1.8 billion in its asset base while trading in a lower volume of 117,000 shares a day on average. It charges 15 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.