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Is WisdomTree U.S. SmallCap ETF (EES) a Strong ETF Right Now?

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The WisdomTree U.S. SmallCap ETF (EES - Free Report) made its debut on 02/23/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

EES is managed by Wisdomtree, and this fund has amassed over $647.63 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Value. 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.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.38% for this ETF, which makes it on par with most peer products in the space.

EES's 12-month trailing dividend yield is 1.10%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For EES, it has heaviest allocation in the Financials sector --about 25.40% of the portfolio --while Consumer Discretionary and Industrials round out the top three.

When you look at individual holdings, Matson Inc (MATX - Free Report) accounts for about 0.81% of the fund's total assets, followed by Genworth Financial Inc (GNW - Free Report) and Mdc Holdings Inc (MDC - Free Report) .

Its top 10 holdings account for approximately 6.31% of EES's total assets under management.

Performance and Risk

The ETF has gained about 1.71% so far this year and is down about -16.47% in the last one year (as of 01/05/2023). In the past 52-week period, it has traded between $39.17 and $51.57.

EES has a beta of 1.24 and standard deviation of 32.75% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 922 holdings, it effectively diversifies company-specific risk.


WisdomTree U.S. SmallCap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 Value ETF (IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $12.06 billion in assets, Vanguard SmallCap Value ETF has $23.96 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.

Bottom Line

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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