Credit: Shutterstock photoLaunched on 02/23/2007, the WisdomTree U.S. SmallCap Earnings Fund (EES) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Value segment of the US equity market.
The fund is sponsored by Wisdomtree. It has amassed assets over $664.78 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.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 0.86%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 21.70% of the portfolio. Consumer Discretionary and Industrials round out the top three.
Looking at individual holdings, Match Group Inc (MTCH) accounts for about 1.73% of total assets, followed by Warrior Met Coal Inc (HCC) and Kemet Corp (KEM).
The top 10 holdings account for about 10.1% 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 added about 9.50% so far this year and was up about 20.74% in the last one year (as of 06/12/2018). In the past 52-week period, it has traded between $31.34 and $39.57.
The ETF has a beta of 1.12 and standard deviation of 16.65% for the trailing three-year period, making it a medium risk choice in the space. With about 835 holdings, it effectively diversifies company-specific risk.
Alternatives
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 Small Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $9.90 B in assets, Vanguard Small-Cap Value ETF has $13.68 B. IWN has an expense ratio of 0.24% 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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WISTR-US SC ERN (EES): ETF Research Reports
Match Group, Inc. (MTCH): Get Free Report
Kemet Corporation (KEM): Free Stock Analysis Report
VIPERS-SC VALUE (VBR): ETF Research Reports
ISHARS-RS 2K VL (IWN): ETF Research Reports
Warrior Met Coal Inc. (HCC): Free Stock Analysis Report
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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 Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
