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

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Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the WisdomTree U.S. SmallCap Earnings Fund (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 $729.86 M, 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

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

While 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. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however 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 1.22%.

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 20.90% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Kemet Corp (KEM - Free Report) accounts for about 1.57% of total assets, followed by Match Group Inc (MTCH - Free Report) and Warrior Met Coal Inc (HCC - Free Report) .

The top 10 holdings account for about 10.61% 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 Earnings 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 gained about 9.16% so far this year and was up about 19.85% in the last one year (as of 07/30/2018). In the past 52-week period, it has traded between $31.34 and $40.20.

The ETF has a beta of 1.12 and standard deviation of 16.53% for the trailing three-year period, making it a medium risk choice in the space. With about 830 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap Earnings Fund 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 Small Cap ETFs 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 Small-Cap Value ETF (VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $10.39 B in assets, Vanguard Small-Cap Value ETF has $13.73 B. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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