Small-Cap ETFs For Many Types Of Investors

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January 14, 2010 4:40pm ETF BASIC NEWS NYSE:IJR

investingExchange Traded Funds, or ETFs, are one way you add exposure to small caps without having to concentrate all of your investments in individual stocks. And there are a number of options that small-cap investors


 should be aware of and have in their potential investment quiver.

“There are ETFs that cover the full spectrum of potential investment ideas, but some of my favorites are those that cover small-cap stocks. The iShares Russell 2000 ETF (NYSE: IWM) is designed to track the performance of the Russell 2000 small-cap index. This index is really the bell-weather for overall small-cap performance and includes companies with a weighted average market cap of $1 billion and an average P/E of 18.2%. This fund invests at least 90% of assets in companies that are in the index so it provides a mix of both value and growth oriented stocks just like the Russell 2000. To help the fund track the index as accurately as possible, up to 10% of the remaining assets can be invested in options, futures or other investment vehicles,” Ian Wyatt Reports From Small Cap Investor.

“Another option is the iShares S&P SmallCap 600ETF (NYSE: IJR) which also invests over 90% of assets in the underlying index, in this case the S&P SmallCap 600 index. This fund shares most of the same companies with the IWM and so as a result the performance in the two funds is nearly identical. If you’re looking to invest only in small-cap growth stocks there is the iShares Russell 2000 Growth Index (NYSE: IWO) or if your are a value investor you’ll want to pick up shares in iShares Russell 2000 Value Index (NYSE: IWN). Both options cover small-cap members of the Russell 2000 but with a particular focus as their respective names imply. The IWO holds companies showing greater growth, whereas the IWN focuses on companies that pay bigger dividends, but trade with lower price-to-book ratios and lower growth. As we would expect the yield on the IWN is much higher, at 2.07% versus that of the IWO which only yields 0.7%,” Wyatt Reports.

“Of course, if you’re feeling bearish about small-cap stocks you can short the Russell 2000 by buying shares of the ProShares Short Russell 2000 (NYSE: RWM) which will provide a return similar to the inverse of the underlying index. For the truly bearish there are double and triple-short ETFs out there (or double and triple-long, for the super-bull), but be forewarned, these are risky investments and employ leverage to achieve their returns. Since I’m an investor and not a trader, I steer clear of these options and suggest you do the same unless you take the time to read, and understand, the potential pitfalls of leveraged funds,” Wyatt Reports.

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Here are some more details on the Small Cap ETFs discussed:

The investment (IWM) seeks investment results that correspond generally to the price and yield performance of the Russell 2000 index. The fund invests at least 90% of assets in the securities of the underlying index. It uses a representative sampling strategy in order to track the Russell 2000 index, which measures the performance of the small-capitalization sector of the US equity broad market. The fund invests in approximately 2000 of the smallest capitalization-weighted companies in the Russell 3000 index.

TOP 10 HOLDINGS ( 3.07% OF TOTAL ASSETS)  
 
Company Symbol % Assets
3Com Corporation (COMS) 0.33
ASSURED GUARANTY LTD (AGO) 0.28
BALLY TECHNOLOGIES (BYI) 0.26
DOMTAR CORP NEW (UFS) 0.27
E*TRADE Financial Corporation (ETFC) 0.28
HIGHWOODS PRPTY INC (HIW) 0.25
Human Genome Sciences, Inc. (HGSI) 0.53
J CREW GROUP INC. (JCG) 0.25
SOLERA HOLDINGS INC (SLH) 0.28
TUPPERWARE BRANDS CP (TUP) 0.34

Chart for iShares Russell 2000 Index (IWM)

The investment (IJR) seeks investment results that correspond generally to the performance, before fees and expenses, of the S&P SmallCap 600 index. The Fund generally invests at least 90% of assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of assets in securities not included in the underlying index but which BGFA believes will help the Fund track the underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents, including shares of money market funds advised by BGFA.

TOP 10 HOLDINGS ( 5.69% OF TOTAL ASSETS)  
 
Company Symbol % Assets
ATWOOD OCEANICS INC (ATW) 0.57
GARDNER DENVER INC (GDI) 0.52
Green Mountain Coffee Roasters, (GMCR) 0.58
MEDNAX, INC (MD) 0.69
OIL STATES INTL INC (OIS) 0.47
Prosperity Bancshares, Inc. (PRSP) 0.49
SENIOR HSG SBI (SNH) 0.7
Skyworks Solutions, Inc. (SWKS) 0.56
ST MARY LAND EXPL (SM) 0.54
Varian Semiconductor Equipment (VSEA) 0.57

Chart for iShares S&P SmallCap 600 Index (IJR)

The investment (IWO) seeks investment results that correspond generally to the price and yield performance of the Russell 2000 Growth index. The fund invests at least 90% of assets in the securities of the underlying index. It uses a replication strategy in order to track the Russell 2000 Growth index, which measures the performance of the small-capitalization sector of the US equity broad market. The fund invests in those Russell 2000 index companies with higher price-to-book ratios and higher forecasted growth.

TOP 10 HOLDINGS ( 5.86% OF TOTAL ASSETS)  
 
Company Symbol % Assets
3Com Corporation (COMS) 0.56
BALLY TECHNOLOGIES (BYI) 0.54
Human Genome Sciences, Inc. (HGSI) 1.09
Informatica Corporation (INFA) 0.47
J CREW GROUP INC. (JCG) 0.52
Jack Henry & Associates, Inc. (JKHY) 0.46
Skyworks Solutions, Inc. (SWKS) 0.49
SOLERA HOLDINGS INC (SLH) 0.58
STERIS CORP (STE) 0.45
TUPPERWARE BRANDS CP (TUP) 0.7

Chart for iShares Russell 2000 Growth Index (IWO)

The investment (IWN) seeks investment results that correspond generally to the price and yield performance of the Russell 2000 Value index. The fund generally invests at least 90% of assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. It may invest the remainder of assets in securities not included in its underlying index but which the Advisor believes will help the fund track its underlying index.

TOP 10 HOLDINGS ( 4.52% OF TOTAL ASSETS)  
 
Company Symbol % Assets
ASSURED GUARANTY LTD (AGO) 0.47
DOMTAR CORP NEW (UFS) 0.53
E*TRADE Financial Corporation (ETFC) 0.54
FirstMerit Corporation (FMER) 0.39
HIGHWOODS PRPTY INC (HIW) 0.49
MFA FINANCIAL INC. (MFA) 0.48
NICOR INC (GAS) 0.4
PLATINUM UNDERWRITRS (PTP) 0.41
PROASSURANCE CORP (PRA) 0.4
Prosperity Bancshares, Inc. (PRSP) 0.41

Chart for iShares Russell 2000 Value Index (IWN)

 

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