Should WisdomTree U.S. SmallCap ETF (EES) Be on Your Investing Radar?

Launched on 02/23/2007, the WisdomTree U.S. SmallCap ETF (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 $629.63 million, 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. 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.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining 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 1.27%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. 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 24.60% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Callon Petroleum Co (CPE) accounts for about 0.71% of total assets, followed by Cal-Maine Foods Inc (CALM) and Tpg Inc (TPG).

The top 10 holdings account for about 6.09% 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 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 lost about -2.12% so far this year and it's up approximately 18.32% in the last one year (as of 03/27/2024). In the past 52-week period, it has traded between $40.06 and $50.69.

The ETF has a beta of 1.26 and standard deviation of 21.66% for the trailing three-year period, making it a medium risk choice in the space. With about 917 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap 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, 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) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $12.18 billion in assets, Vanguard Small-Cap Value ETF has $28.25 billion. 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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WisdomTree U.S. SmallCap ETF (EES): ETF Research Reports

Cal-Maine Foods, Inc. (CALM) : Free Stock Analysis Report

Callon Petroleum Company (CPE) : Free Stock Analysis Report

Vanguard Small-Cap Value ETF (VBR): ETF Research Reports

iShares Russell 2000 Value ETF (IWN): ETF Research Reports

TPG Inc. (TPG) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

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