ETF Talk: Seeking Big Opportunity in Japanese Small Caps


Earlier this year, I wrote about taking advantage of Abenomics and the Bank of Japan’s plan to create inflationary, yen-weakening pressures in the Japanese economy to spur exports and growth. One of this year’s many new exchange-traded funds (ETFs), WisdomTree Japan Hedged SmallCap Equity Fund (DXJS), plays right into that strategy.

For that reason, I want to introduce you to DXJS. The fund seeks to reproduce, before fees and expenses, the performance of an index of small-cap Japanese equities. The index hedges against exposure to fluctuations between the value of the U.S. dollar and the Japanese yen. Specifically, the index is designed to have higher returns when the yen is weakening relative to the U.S. dollar. This fund is non-diversified.

The fund has gained 10.79% since its inception date of June 28, 2013. There have been no dividends issued as yet.

DXJS chart

The fund is heavily weighted towards industrials, 26.66%, and consumer discretionary, 24.38%. Other sectors include materials, 11.65%; financials, 11.16%; consumer staples, 10.39%; information technology, 9.98%; and health care, 4.32%. The top 10 holdings constitute only 6.42% of this ETF’s assets. The top held companies are Iida Group Holdings Co Ltd, 0.85%; Denki Kagaku Kogyo K K, 0.73%; Ube Industries Ltd/Japan, 0.69%; Tokai Tokyo Financial Holdings (TOKTY), 0.69%; and Kinden Corp, 0.69%.

This fund is attractive not only because it’s a play in a recovering Japanese market and because it’s a small-cap fund (and therefore focused on selling to the second-largest developed economy in the world), but also because it uses a hedging strategy to take advantage of a deliberate policy of weakening the yen against the dollar. If this all seems like good news to you, you may be interested in WisdomTree Japan Hedged SmallCap Equity Fund (DXJS).

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my ETF Talk from last week’s Eagle Daily Investor about a fund which invests in China’s growing middle class. I also invite you to comment about my column in the space provided below my Eagle Daily Investor commentary.

Finally, my colleagues at Eagle have been working hard on re-designing the site. Go check out the new site now and come back every day for exclusive stories, market commentary and analysis you won’t find anywhere else!


Doug Fabian

Doug Fabian has continued to uphold the reputation of the Successful Investing newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs , Investing Ideas , Stocks

Referenced Stocks: DXJS , TOKTY

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