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Small-Cap ETFs & Stocks to Outperform This Holiday Season (Revised)

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The holiday season is off to a great start this year buoyed by a digital shopping boom. Online sales jumped 28% to $3.7 billion on Thanksgiving Day and 23.6% to a record $6.22 billion on Black Friday, according to Adobe Analytics. This makes Thursday the fastest-growing day for e-commerce sales in history and marks the first Friday after Thanksgiving Day in history to see more than $2 billion in sales from smartphones. About 33.5% of e-commerce sales came from mobile devices compared with 29.1% in 2017.

Despite the optimism, the three major indices logged in their biggest losses in a Thanksgiving week since 2011, with the Dow Jones, the S&P 500 and the Nasdaq Composite Index tumbling 4.4%, 3.8% and 4.3%, respectively. The decline came amid myriad woes, especially the ongoing trade tensions between the United States and China, global growth worries, FAANG sell-off as well as the worsening oil price rout (read: Best & Worst ETFs of Thanksgiving Week).

However, if we go by history, stocks are expected to rise, recovering all their losses over the next month. This is especially true as the Dow Jones Industrial Average, the S&P 500, the Nasdaq 100 and the Russell 2000 indexes all generally climb between Thanksgiving and Christmas Eve, according to data from Kensho. The Dow Jones has returned an average of 1.93% in the time period since 1990, while the S&P 500 and the Nasdaq gained 1.77% and 1.66% respectively. The Russell 2000 has outperformed during the holidays, rising on average 2.46%.

The outperformance of the small-caps seems to hold true this year given that these pint-sized stocks are well insulated from international headwinds, which we are currently seeing. These are considered safe and better plays if any political issue or economic turmoil creeps into the picture. Additionally, the strength in U.S. dollar, which makes domestic goods more expensive overseas, will also support the small-cap surge. The Russell 2000 Index was down only 0.5% in a Thanksgiving week.

Further, a booming economy will provide a lift to stock prices. This is especially true as the American economy has been on a solid pace of growth with robust job creation, strong GDP growth, a 50-year low unemployment rate, the fastest pace of wage gains in nearly a decade, and rising consumer and business confidence. While third-quarter GDP growth slowed to 3.5% from 4.2% in the second quarter amid growing headwinds from trade, it marks the best two-quarter stretch in four years. With this, the economy is on pace for the fastest annual growth in 13 years.

Small-cap stocks generally lead the way on an improving American economy though they are extremely volatile and could lead to huge losses compared with large and mid-cap counterparts in a short span (read: 5 ETFs That Deserve Special Thanks in 2018).

Given this, we have presented five ETFs & stocks that are expected to outdo this holiday season. All these carry a Zacks Rank #1 (Strong Buy) or #2 (Buy), suggesting their continued outperformance.

ETF Picks

Schwab U.S. Small-Cap ETF (SCHA - Free Report)


This ETF tracks the Dow Jones U.S. Small-Cap Total Stock Market Index.

Zacks ETF Rank: #1
Expense Ratio: 0.05%
AUM: $7.5 billion
One-Week Return: 1.8%

Vanguard Small-Cap ETF (VB - Free Report)

This ETF follows the CRSP US Small Cap Index (read: Guide to the 25 Cheapest ETFs).

Zacks ETF Rank: #1
Expense Ratio: 0.05%
AUM: $22.5 billion
One-Week Return: 1.8%

iShares S&P Small-Cap 600 Growth ETF (IJT - Free Report)

This product offers exposure to U.S. small-cap stocks of companies whose earnings are expected to grow at an above-average rate relative to the market by tracking the S&P SmallCap 600(R) Growth Index.

Zacks ETF Rank: #2
Expense Ratio: 0.25%
AUM: $6 billion
One-Week Return: 1.5%

Vanguard Small-Cap Value ETF (VBR - Free Report)

This fund follows the CRSP US Small Cap Value Index that measures the return of small-capitalization value stocks (read: Beat the Market with Pure Style ETFs).

Zacks ETF Rank: #1
Expense Ratio: 0.07%
AUM: $12.8 billion
One-Week Return: 1.2%

iShares Core S&P Small-Cap ETF (IJR - Free Report)

This fund tracks the S&P SmallCap 600 Index.

Zacks ETF Rank: #1
Expense Ratio: 0.07%
AUM: $41.9 billion
One-Week Return: 1.2%

Stock Picks

Vericel Corporation (VCEL - Free Report)


It is focused on developing patient-specific expanded cellular therapies for use in the treatment of patients with severe diseases and conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks Rank: #1
Growth Score: B
Market Cap: $775.05 million
One-Week Return: 7.5%

Malibu Boats Inc. (MBUU - Free Report)

It operates as a designer, manufacturer and marketer of sport boats primarily in the United States.

Zacks Rank: #2
Growth Score: A
Market Cap: $987.9 million
One-Week Return: 6.8%

Upland Software Inc. (UPLD - Free Report)

It is a provider of cloud-based Enterprise Work Management software that helps organizations plan, manage and execute projects and work.

Zacks Rank: #1
Growth Score: B
Market Cap: $627.6 million
One-Week Return: 4.9%

QuinStreet Inc. (QNST - Free Report)

It is a provider of online direct marketing and media services offering online messaging, email broadcasting, search engine marketing, and brand management services (read: Hottest Online Stock & ETF Deals for Cyber Monday).

Zacks Rank: #2
Growth Score: A
Market Cap: $739.8 million
One-Week Return: 3.7%

eGain Corporation (EGAN - Free Report)

This company provides customer engagement solutions and offers web customer interaction applications, social customer interaction applications and contact center applications.

Zacks Rank: #1
Growth Score: A
Market Cap: $198.2 million
One-Week Return: 2.7%

(We are reissuing this article to correct a mistake. The original article, issued on November 28, 2018, should no longer be relied upon.)
 

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