The iShares Small Cap ETF (IJR) Is Rapidly Catching Up To IWM

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September 22, 2017 12:29pm NYSE:IJR

Today’s move higher in equities has propelled the Russell 2000 and related tracker ETFs such as the $40.3 billion IWM (iShares Russell 2000, Expense Ratio 0.20%) to new all-time highs.


We have reported larger than normal inflows into IWM in our ETF Fund Flows recap recently, with the fund taking in more than $2 billion in recent sessions preceding today’s jolt higher. Interestingly, the fund is still in the red year-to-date in terms of net flows (-$570 million out).

This is not the case for competing Small-Cap ETF IJR (iShares Core S&P Small Cap, Expense Ratio 0.07%, $31.8 billion in AUM), which also comes from iShares, as this fund has pulled in an impressive more than $4.3 billion year-to-date — and is also surging to new highs today.

With access to 2,000 stocks, IWM and the Russell 2000 clearly run rather deep in terms of portfolio diversification, and the fund weightings are typically spread out well across the basket with any potential “overweightings” being avoided. If we look at the top holdings presently in IWM we see the following, which likely include some names that the average investor may not be conscious of, and much less aware that these stocks have turned in promising performance lately to propel the Index higher: 1) KITE (0.44%), 2) BLUE (0.29%), 3) EXAS (0.27%), 4) KNX (0.26%), and 5) CTLT (0.25%). Worth noting here is that four of the top five holdings, KITE, BLUE, EXAS, and CTLT are all categorized as “Health Care” stocks.

When we examine IJR further in terms of top end holdings, we see a different look entirely: 1) MKSI (0.67%), 2) ALE (0.54%), 3) HCSG (0.53%), 4) SR (0.49%), and NKTR (0.47%) where only one of the top five names, NKTR, is classified as “Health Care.”

Given the observation we just made about “Health Care” and “Small Cap,” it makes plenty of sense to look at the under-recognized PSCH (PowerShares S&P SmallCap Health Care Portfolio, Expense Ratio 0.29%, $225 million in AUM), which has had very moderate flows year-to-date ($8 million in). Interestingly, NKTR, which we just mentioned as the fifth largest holding in the S&P 600 and thus the tracker IJR, is the largest weighted single name inside of PSCH at 3.66% of the portfolio.

IJR-2017-09-22

The iShares Core S&P Small Cap ETF (NYSE:IJR) was trading at $71.83 per share on Friday afternoon, up $0.34 (+0.48%). Year-to-date, IJR has gained 5.12%, versus a 12.54% rise in the benchmark S&P 500 index during the same period.

IJR currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 37 ETFs in the Small Cap Blend ETFs category.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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