Technology

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

Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the WisdomTree U.S. SmallCap ETF (EES), a passively managed exchange traded fund launched on 02/23/2007.

The fund is sponsored by Wisdomtree. It has amassed assets over $401.92 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

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

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. 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 1.44%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 23% of the portfolio. Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Michaels Cos Inc/the (MIK) accounts for about 1.45% of total assets, followed by Range Resources Corp (RRC) and Cleveland-Cliffs Inc (CLF).

The top 10 holdings account for about 9.89% 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 lost about -13.82% so far this year and is down about -8.61% in the last one year (as of 10/23/2020). In the past 52-week period, it has traded between $19.73 and $38.59.

The ETF has a beta of 1.42 and standard deviation of 29.74% for the trailing three-year period, making it a medium risk choice in the space. With about 836 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 SmallCap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $8.44 billion in assets, Vanguard SmallCap Value ETF has $14.19 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds 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
 
ClevelandCliffs Inc. (CLF): Free Stock Analysis Report
 
Range Resources Corporation (RRC): Free Stock Analysis Report
 
The Michaels Companies, Inc. (MIK): Free Stock Analysis Report
 
Vanguard SmallCap Value ETF (VBR): ETF Research Reports
 
iShares Russell 2000 Value ETF (IWN): ETF Research Reports
 
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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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