If you're interested in broad exposure to the Small Cap Value segment of the US equity market, look no further than 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 $615.48 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.
Carrying lower than average price-to-earnings and price-to-book ratios, value stocks 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.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
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 1.80%.
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 21.10% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Match Group Inc (MTCH - Free Report) accounts for about 2.08% of total assets, followed by Premier Inc (PINC - Free Report) and Warrior Met Coal Inc (HCC - Free Report) .
The top 10 holdings account for about 11.45% 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 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 0.31% so far this year and is down about -10.36% in the last one year (as of 01/04/2019). In the past 52-week period, it has traded between $30.28 and $40.77.
The ETF has a beta of 1.12 and standard deviation of 16.50% for the trailing three-year period, making it a medium risk choice in the space. With about 809 holdings, it effectively diversifies company-specific risk.
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 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 Small-Cap Value ETF (VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $8.64 B in assets, Vanguard Small-Cap Value ETF has $11.41 B. IWN has an expense ratio of 0.24% and VBR charges 0.07%.
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.