5 Small-Cap ETFs at the Forefront of the Latest Rally


Wall Street staged a solid comeback in July from the worst first half in 52 years with the three major indices posting the best month since 2020. While SPDR S&P 500 ETF Trust SPY has added 9% over the past month, the small-cap counterpart iShares Russell 2000 ETF IWM outperformed, climbing 10.5%. The outperformance came as investors scooped up the cheaply valued stocks.

While many ETFs have risen over the past month, we have highlighted five that are the forefront of the rally. These include BlackRock Future Innovators ETF BFTR, Invesco S&P SmallCap Momentum ETF XSMO, Pacer US Small Cap Cash Cows 100 ETF CALF, Roundhill Acquirers Deep Value ETF DEEP, and Vanguard Small Cap Growth ETF VBK.

Inside the Latest Rally

The small-cap stocks have largely underperformed this year, making them attractive to investors. The Russell 2000 declined about 16% in 2022 even after the rebound last month, whereas the S&P 500 decreased 13.3% so far this year. This has put the small-cap benchmark at its cheapest relative to the large-cap Russell 1000 since at least March 2020. Notably, IWM currently trades at a 13.3 multiple of the P/E ratio while SPY has  a19.9 P/E ratio (read: 5 Top-Ranked ETFs That Outperformed in July).
 
As small-cap companies are more domestically tied, these are poised to outperform when the economy improves. Commodity prices have been falling, which is likely to boost consumer spending. Additionally, deteriorating economic conditions and recession fears might prompt the Fed to scale back its interest rate hiking cycle in the fall, resulting in a boost to small caps.

BlackRock Future Innovators ETF (BFTR) – Up 14.6%

BlackRock Future Innovators ETF offers a diversified exposure to innovative companies that may deliver growth and capital appreciation. It holds 52 securities, with information technology taking the largest share at 35.4%, while health care, consumer discretionary and industrials round off the next spots (read: Tech ETFs Make A Solid Comeback in July).

BlackRock Future Innovators ETF has accumulated $7.8 million in its asset base and charges 80 bps in annual fees.

Invesco S&P SmallCap Momentum ETF (XSMO) – Up 13.8%

Invesco S&P SmallCap Momentum ETF offers exposure to companies in the S&P SmallCap 600 Index having the highest “momentum scores.” It tracks the tracking the S&P Smallcap 600 Momentum Index, holding 116 stocks in its basket.

Invesco S&P SmallCap Momentum ETF has gathered $156.2 million in its asset base and charges 39 bps in annual fees. The fund trades in an average daily volume of 16,000 shares and has a Zacks ETF Rank #3 (Hold).

Pacer US Small Cap Cash Cows 100 ETF (CALF) – Up 13.6%

Pacer US Small Cap Cash Cows 100 ETF is a strategy-driven ETF that aims to provide capital appreciation over time by screening the S&P SmallCap 600 Index for the top 100 companies based on free cash flow yield. CALF tracks the Pacer US Small Cap Cash Cows Index and holds 101 stocks in its basket, with each accounting for less than 2.6% share. Consumer discretionary takes the top spot at 36.5% of assets, followed by industrials (16.6%) and information technology (12.8%).

The fund has amassed $994.6 million in its asset base and trades in an average daily volume of 212,000 shares. It charges 59 bps in annual fees.

Roundhill Acquirers Deep Value ETF (DEEP) – Up 12.5%

Roundhill Acquirers Deep Value ETF is designed to offer retail and institutional investors exposure to deeply undervalued stock, seeking to provide investment results that measure the performance of the Acquirers Deep Value Index. It holds 99 stocks in its basket, with each accounting for less than 1.5% share (read: 5 Small-Cap ETFs Trading at a Discount).

Roundhill Acquirers Deep Value ETF has amassed $45.9 million in its asset base while trades in an average daily volume of 6,000 shares. It charges 80 bps in annual fees and has a Zacks ETF Rank #3 (Hold).

Vanguard Small Cap Growth ETF (VBK) – Up 11.7%

Vanguard Small Cap Growth ETF targets the growth segment of the small-cap space and follows the CRSP US Small Cap Growth Index. It holds 715 stocks in its basket, with each accounting for less than 1% of assets. Vanguard Small Cap Growth ETF has key holdings in healthcare, technology, industrials, and consumer discretionary.

Vanguard Small Cap Growth ETF has amassed $12.8 billion and charges 7 bps annual fees. The product trades in an average daily volume of 360,000 shares and has a Zacks ETF Rank #3.

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SPDR S&P 500 ETF (SPY): ETF Research Reports

iShares Russell 2000 ETF (IWM): ETF Research Reports

Vanguard SmallCap Growth ETF (VBK): ETF Research Reports

Pacer US Small Cap Cash Cows 100 ETF (CALF): ETF Research Reports

Invesco S&P SmallCap Momentum ETF (XSMO): ETF Research Reports

Roundhill Acquirers Deep Value ETF (DEEP): ETF Research Reports

BlackRock Future Innovators ETF (BFTR): 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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