The WisdomTree US SmallCap ETF (EES) debuted on February 23, 2007. Style Box – A smart beta exchange traded fund that offers broad exposure to the Small Cap Value category of the market.
What are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization-weighted indices designed to represent a market or specific segments of a market.
Market Cap Weighted Indices are perfect for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way to replicate market returns.
However, some investors believe they can beat the market with good stock selection. This group may invest in another class of funds called smart betas that track non-cap weighted strategies.
These indices seek to select stocks with high potential for risk and return performance based on certain underlying characteristics or combinations of such characteristics.
The Smart Beta Space offers investors a variety of options, from one of the simplest strategies, equal weighting, to more complex strategies such as weighting based on fundamentals and volatility/momentum. However, not all of these methodologies have yielded impressive benefits.
Fund Sponsor & Index
EES is managed by Wisdomtree, and the fund has accumulated over $647.63 million, making it Small Cap Value, one of Style Box’s average-sized ETFs. The EES seeks to match the performance before fees and expenses of the WisdomTree US SmallCap Earnings Index.
The WisdomTree US SmallCap Index is a fundamentally weighted index that measures the performance of profitable companies within the small cap segment of the US equity market.
Expenses and Other Expenses
Expense ratio is a key factor in ETF returns, and over the long term, cheaper funds can significantly outperform more expensive ones, but other factors remain the same.
The annual operating cost of this ETF is 0.38%, comparable to most similar products in the space.
EES has a 12-month trailing dividend yield of 1.10%.
Sector exposure and top holdings
ETFs offer a wide variety of exposures that minimize the risk of a single stock, but it is still important to examine a fund’s holdings before investing. Fortunately, most ETFs are highly transparent. It is an expensive commodity and we disclose our holdings daily.
For the EES, the Financials sector has the largest allocation, accounting for approximately 25.40% of the portfolio, with Consumer Discretionary and Industrials rounding out the top three.
Looking at individual holdings, Matson (MATX) accounts for about 0.81% of the fund’s total assets, followed by Genworth Financial (GNW) and Mdc Holdings (MDC).
The holdings of the top 10 stocks represent approximately 6.31% of EES’s total assets under management.
performance and risk
The ETF is up about 1.71% so far this year and is down about -16.47% over the past year (as of 5 January 2023). Over the past 52 weeks, it has traded between $39.17 and $51.57.
The EES has a beta of 1.24 with a standard deviation of 32.75% over the past three years, making the fund a medium-risk option in this area. It holds approximately 922 shares and effectively diversifies company-specific risks.
Alternative proposal
The WisdomTree US SmallCap ETF is a reasonable option for investors looking to outperform the Style Box – Small Cap Value segment of the market. However, there are other areas of his ETFs that investors can consider.
The IShares Russell 2000 Value ETF (IWN) tracks the Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR) tracks the CRSP US Small Cap Value Index. The IShares Russell 2000 Value ETF has $12.06 billion in assets and the Vanguard SmallCap Value ETF has $23.96 billion in assets. The IWN expense ratio is 0.23% and the VBR fee is 0.07%.
Investors looking for a cheaper, less risky option should consider a traditional market cap weighted ETF that aims to match the returns of Style Box – Small Cap Value.
Conclusion
Visit the Zacks ETF Center to learn more about this and other ETFs, select products that match your investment objectives, and read articles on the latest developments in the ETF investment universe.
Want the latest recommendations from Zacks Investment Research? Download today the 7 Best Stocks of the Next 30 Days.Click to get this free report
WisdomTree US SmallCap ETF (EES): ETF Research Report
Genworth Financial, Inc. (GNW) : Free Inventory Analysis Report
MDC Holdings, Inc. (MDC): Free Stock Analysis Report
Matson, Inc. (MATX) : Free Inventory Analysis Report
Vanguard Small Cap Value ETF (VBR): ETF Research Report
iShares Russell 2000 Value ETF (IWN): ETF Research Report
Click here to read this article on Zacks.com.
Zacks Investment Research
