12 Best Small-Cap Value ETFs

Taranga News September 15, 2023 0 Comments

In this section, we’ll take a look at the 12 best small cap value ETFs. If you want to skip to our introduction to small cap investing, check out 5 Best Small-Cap Value ETFs.

Small cap investing is a special strategy that exposes a person to potential profit opportunities if the timing of making the bet is right. The biggest reason why most people are attracted to small caps is that their low share prices lead to significant profits when the market performs well. Besides small market capitalization, another advantage of small cap stocks is that, especially for US investors, these companies are generally decoupled from global economies.

This insulation, which mostly results from the fact that small cap stocks tend to be companies with limited economic scale, also means that if the economic news in other countries is not very good, shares may decline. For example, Apple is one of the largest smartphone companies in the world and the undisputed king when it comes to the high-end market. Additionally, its smartphones are the only smartphones that have often seen extensive media coverage for providing strong protection for their security features. Naturally, this builds trust in the brand and the iPhone becomes quite popular. However, in early September, reports began emerging that China was banning the use of smartphones by government officials. This also affected Apple’s shares, as the stock fell from a closing price of $189.70 on September 5 to $177.58 two days later. The scale of Apple’s operations and its size (latest market capitalization is $2.8 trillion) also means that news similar to the Chinese iPhone bans tends to rebalance other companies’ share prices. In short, the world’s most valuable company in terms of market capitalization lost $156 billion in market value due to potential changes in a country thousands of miles away.

In the small cap world, such news will impact companies too, but only those that have a significant business relationship with Apple. Additionally, this would also mean that while Apple’s $156 billion market cap loss represents a 5.5% decline in market capitalization, depending on the nature of our hypothetical small cap company, the market value loss could be larger. Is. Players like Apple are often responsible for a large portion of the revenues of smaller companies, and the severe impact of this unbalanced relationship can often turn companies from turning into legacy companies.

The risk of losing large sums of money in small cap stocks also makes it important to consider the macroeconomic environment when investing in them. After all, their isolation from global economic conditions makes them even more sensitive to what is going on in the US. As a result, common market wisdom says that small cap stocks are the ones that suffer big losses as the market prepares for a recession. This is because investors generally look for the safety offered by large cap companies, especially because their shares are more liquid and can be easily bought and sold in the market. Once an economic recession, or news of it, is over, small cap stocks also typically rise sharply, as piles of money bet that they will be able to capture the demand that will be lost in an economic recession. Has decreased.

Within the small cap stock classification, companies can be divided across several parameters. Two of these are value stocks and growth stocks. A value stock can be defined with several metrics. Two of these are the price to earnings and price to sales ratios, which measure the premium that the market pays on a company’s ability to bring in money through overall sales or after accounting for all costs of production, financing expenses and tax obligations. doing. , Established companies generally have lower P/E and P/S ratios depending on the industry, and these stocks are especially attractive for portfolio diversification. This is because a value stock suffers less losses during market downturns because investors have avoided placing a premium on its shares as they have done with growth stocks. Also, prudent stock market gurus also determine whether a value stock is likely to rise in the future or not. After all, all the big companies today were value stocks yesterday, and the smartest investors bought their shares right now to get rich.

Before we even think about small cap value exchange traded funds (ETFs), a great example of a value stock is American Express Company (NYSE:AXP). AXP’s place in the history of the stock market is associated with Warren Buffett, who started buying shares when they were very cheap. Mr. Buffett bought AXP when shares had fallen significantly, and he recalled this period by commenting years later:

There was another small annoyance that was extremely interesting. American Express was not a corporation. It was then the only major publicly traded security that was a joint stock association. Thus, the ownership of the company was assessable. If it turned out that liabilities exceeded assets, [then] The ownership was assessable. So every trust department in the United States panicked. I remember Continental Bank owned over 5% of the company and suddenly not only did they see that there was going to be zero worth of stock in the trust accounts, but it was also going to be undervalued. Of course, stocks ran out and the market became a bit inefficient for a short period of time. , , .The entire American Express company, synonymous with financial integrity and wealth choice around the world. When Roosevelt closed the banks, he discounted American Express travelers checks so they could be replaced as American currency. This was not a business that should have been sold for $150 million, but everyone was horrified.

So, with these details in mind, we decided to take a look at some of the top Small Cap Value ETFs, the top picks of which are Invesco S&P SmallCap 600 Revenue ETF (NYSE: RWJ), Invesco S&P SmallCap Value With Momentum ETFs (NYSE:). XSVM), and First Trust Small Cap Value Alphadex Fund (NASDAQ:FYT).

12 Best Small-Cap Value ETFs

Photo by Karolina Grabowska from Pexels

our methodology

To compile our list of the best small cap ETFs we first created a list of the 20 largest small cap value ETFs and then ranked them based on their past five-year daily total returns. Among these, the top 12 small cap value ETFs are as follows.

Best Small-Cap Value ETFs

12. Roundhill Acquirers Deep Value ETF (NYSE:DEEP)

5 year return: 1.41%

Roundhill Acquirers Deep Value ETF (NYSE:DEEP) starts with the lowest net assets on our list. They are worth $40 million, and the fund is part of the Roundhill Investments fund family. Some of its largest holdings are WW International, Inc. (NASDAQ:WW), Vital Energy, Inc. (NYSE:VTLE), and Veritiv Corporation (NYSE:VRTV). It joins Invesco S&P SmallCap 600 Revenue ETF (NYSE:RWJ), Momentum ETF (NYSE:XSVM) along with Invesco S&P SmallCap Value and First Trust Small Cap Value Alphadex Fund (NASDAQ:FYT) on the list of best small caps . Value ETFs.

11. iShares Morningstar Small-Cap Value ETF (NYSE:ISCV)

5 year return: 2.91%

The iShares Morningstar Small-Cap Value ETF (NYSE:ISCV) has total assets of $388 million and is part of the iShares fund family. It limits its focus to investing only in US small cap companies and was established in 2004. The fund’s trailing twelve-month price-to-earnings ratio is 9.88, which meets the requirement for value stocks that typically have low P/E ratios.

10. Vanguard Russell 2000 Value Index Fund (NASDAQ:VTWV)

5 year return: 2.98%

The Vanguard Russell 2000 Value Index Fund (NASDAQ:VTWV) invests primarily in U.S. small-cap firms. The fund has total assets of $965 million, making it one of the largest funds on our list. Its holdings are spread across a variety of industries, with financial services, real estate, industrials and consumer cyclical stocks having the largest share. According to the company, the Vanguard Russell 2000 Value Index Fund (NASDAQ:VTWV)’s largest investments are in Commercial Metals Company (NYSE:CMC), Chord Energy Corporation (NASDAQ:CHRD), and Murphy Oil Corporation (NYSE:MUR).

9. iShares S&P Small-Cap 600 Value ETF (NYSE:IJS)

5 year return: 3.28%

The iShares S&P Small-Cap 600 Value ETF (NYSE:IJS) is part of the iShares ETF fund family. It has net assets of $6.85 billion and was founded in 2000 – making it one of the oldest small cap value ETFs on our list. Since it is a value fund, it selects companies that it believes offer a premium compared to their market share value. Like the Vanguard Russell 2000 Value Index Fund, the majority of the iShares S&P Small-Cap 600 Value ETF’s (NYSE:IJS) holdings are spread across the consumer cyclical, financial services, real estate, and industrials sectors.

8. Vanguard S&P Small-Cap 600 Value Index Fund (NYSE:VIOV)

5 year return: 3.40%

The Vanguard S&P Small-Cap 600 Value Index Fund (NYSE:VIOV) focuses its attention on investing primarily in companies that are part of the S&P 600 Small Cap Value Index. The fund has net assets of $1.33 billion and its largest holdings are Meritage Homes Corporation (NYSE:MTH), Insight Enterprises, Inc. (NASDAQ:NSIT), and Radian Group Inc. (NYSE:RDN).

7. SPDR S&P 600 Small Cap Value ETF (NYSE:SLYV)

5 year return: 3.45%

The SPDR S&P 600 Small Cap Value ETF (NYSE:SLYV) is another exchange traded fund that tracks the S&P 600 Small Cap Value Stock Index. It has a net worth of approximately $4 billion, and has been in operation for more than two decades since it was founded in 2000. Since it follows the S&P index, its largest stakes are also in Meritage Homes, Radian Group and Insight Enterprises.

6. Invesco S&P SmallCap 600 Pure Value ETF (NYSE:RZV)

5 year return: 4.59%

Invesco S&P SmallCap 600 Pure Value ETF (NYSE:RZV) is one of the smallest small cap exchange traded funds on our list as it has net assets of just $249 million. About a third of its investments are in consumer cyclical firms, and the fund’s top three investments are SkyWest, Inc. (NASDAQ:SKYW), M/I Homes, Inc. (NYSE:MHO), and telephone and data systems. , Inc. (NYSE:TDS).

Invesco S&P SmallCap 600 Revenue ETF (NYSE:RWJ), Invesco S&P SmallCap 600 Pure Value ETF (NYSE:RZV), Invesco S&P SmallCap Value with Momentum ETF (NYSE:XSVM), and First Trust Small Cap Value Alphadex Fund (NASDAQ:FYT ) are some of the best small cap value ETFs.

Click to continue reading and see the 5 best small-cap value ETFs.