Should Schwab Fundamental U.S. Small Company ETF (FNDA) Be on Your Investing Radar?
Designed to provide broad exposure to the Small Cap Value segment of the US equity market, the Schwab Fundamental U.S. Small Company ETF (FNDA) is a passively managed exchange traded fund launched on 08/13/2013.
The fund is sponsored by Charles Schwab. It has amassed assets over $8.51 billion, making it one of the larger 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.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value 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 0.25%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.42%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Industrials sector--about 20% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Abercrombie And Fitch Class A (ANF) accounts for about 0.58% of total assets, followed by Echostar Corp Class A (SATS) and Royal Caribbean Group Ltd (RCL).
The top 10 holdings account for about 3.88% of total assets under management.
Performance and Risk
FNDA seeks to match the performance of the Russell RAFI US Small Co. Index before fees and expenses. The RAFI Fundamental High Liquidity US Small Index measures the performance of small U.S. companies based on their fundamental size and weight.
The ETF return is roughly 2.56% so far this year and is up about 8.42% in the last one year (as of 08/05/2024). In the past 52-week period, it has traded between $44.98 and $59.94.
The ETF has a beta of 1.19 and standard deviation of 21.18% for the trailing three-year period, making it a medium risk choice in the space. With about 1045 holdings, it effectively diversifies company-specific risk.
Alternatives
Schwab Fundamental U.S. Small Company ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FNDA is a good 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 Avantis U.S. Small Cap Value ETF (AVUV) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While Avantis U.S. Small Cap Value ETF has $12.29 billion in assets, Vanguard Small-Cap Value ETF has $28.42 billion. AVUV has an expense ratio of 0.25% and VBR charges 0.07%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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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Get it free >>Schwab Fundamental U.S. Small Company ETF (FNDA): ETF Research Reports
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report
EchoStar Corporation (SATS) : Free Stock Analysis Report
Vanguard Small-Cap Value ETF (VBR): ETF Research Reports
Avantis U.S. Small Cap Value ETF (AVUV): ETF Research Reports
