The fourth quarter can be a tricky time to own small-cap
. Fund managers that are down on small-cap positions are apt to
take those losses in an effort to gain some tax benefits before
year-end. Then, if investors are feeling cheery to start the new
year, professionals will reenter small market value equities,
leading to the January Effect. That is the scenario where small
caps spark a first-quarter rally.
Recent price action in the iShares Russell 2000 Index Fund
) could be indicating small-caps are poised to rally. IWM, one of
the marquee small-cap ETFs on the market, is up more than two
percent in the past five trading days. However, over the past 30
and 90 days, the $14.9 billion has incurred modest losses.
Small caps are volatile. That is a fact of life, but IWM's
recent ups and downs underscore the notion that there are other
small-cap ETFs that could deliver more upside in a possible risk
on rally. Consider these ETFs that have been outpacing IWM in
PowerShares DWA SmallCap Technical Leaders Portfolio
The PowerShares DWA SmallCap Technical Leaders Portfolio debuted
in July, but its rookie status is not what makes this fund
unique. Rather than being a traditional cap-weighted ETF, DWAS
evaluates relative strength characteristics of various stocks
before including them in the fund. Dorsey Wright selects possible
constituents "from a small-cap universe of approximately 2,000 of
the smallest U.S. companies selected from a broader set of 3,000
companies," according to PowerShares.
From there, DWAS is whittled down to 200 holdings. At the
sector level, DWAS is heavy on discretionary, financial services,
health care and technology names. Favorable seasonal trends for
discretionary names have helped DWAS rise 0.86 percent in the
past month. Over the past 90 days, the ETF is up 0.94 percent.
IWM is down over both time periods.
Market Vectors Indonesia Small-Cap ETF (NYSE:
The Market Vectors Indonesia Small-Cap ETF is another new
small-cap ETF having come to market in March. Thus far, IDXJ has
not been nearly as popular as its large-cap brethren such as the
Market Vectors Indonesia ETF (NYSE:
) and part of that has to do with timing as IDXJ debuted at a
time when IDX was struggling while other emerging markets ETFs
were on fire.
That means if Indonesian large-caps are struggling, it will be
even harder for the country's more volatile small caps to gain
traction with foreign investors. Recently, IDXJ
has shown signs of life
as some investors have started to view select Indonesian small
caps as attractively valued.
growth outlook for Indonesia
, Southeast Asia's largest economy, buoys the case for a small
position in IDXJ over the coming months. Over the past month, the
fund is up one percent and since late August, IDXJ has gained two
percent. Those performances indicate IDXJ could be a better bet
than IWM if emerging markets ETFs come back into favor in
iShares Core S&P Small-Cap ETF (NYSE:
Same ticker, but a new twist on the old Shares S&P Small Cap
600 Index Fund. IJR is part of the new iShares
, which features 10 ETFs with paltry expense ratios aimed
cost-conscious investors. For its part, IJR now charges just 0.16
percent per year. That makes IJR slightly cheaper than IWM, which
charges 0.23 percent.
It is not just the lower fees that make IJR appealing. Over
the past week, month and three months the ETF has outpaced IWM.
Not only that, but has the
lower beta against the S&P 500 and a lower
three-year standard-deviation, according to iShares data
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