Back to top

Image: Bigstock

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

Read MoreHide Full Article

Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the WisdomTree U.S. SmallCap ETF (EES - Free Report) , a passively managed exchange traded fund launched on 02/23/2007.

The fund is sponsored by Wisdomtree. It has amassed assets over $676.49 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 1.05%.

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.

This ETF has heaviest allocation to the Financials sector--about 24.90% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Mdc Holdings Inc accounts for about 0.79% of total assets, followed by Matson Inc (MATX - Free Report) and Genworth Financial Inc (GNW - Free Report) .

The top 10 holdings account for about 6.45% 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 added about 6.25% so far this year and is down about -11.04% in the last one year (as of 01/12/2023). In the past 52-week period, it has traded between $39.17 and $51.23.

The ETF has a beta of 1.24 and standard deviation of 32.79% for the trailing three-year period, making it a medium risk choice in the space. With about 920 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 reasonable 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 $12.45 billion in assets, Vanguard SmallCap Value ETF has $24.82 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.

Published in