It has been a decent year for the materials sector, though not one that will go down in the record books as being particularly jaw-dropping.
With just a few trading days left in 2013, the Materials Select Sector SPDR (NYSEArca: XLB) and the Vanguard Materials ETF (NYSEArca: VAW), two large-cap focused funds, have an average year-to-date, S&P 500-lagging gain of 24.5%.
Investors that have taken on the added risk and volatility that comes along with small-caps in a cyclical sector such as materials have rewarded by the PowerShares S&P SmallCap Materials Portfolio (NasdaqGS: PSCM). The often overlooked $21 million PSCM, which is is based on the S&P SmallCap 600 Capped Materials Index, has returned nearly 30% this year. [Embrace These Cyclical ETFs in December]
Like the other PowerShares small-cap sector funds, PSCM was created to be the small-cap answer to large-cap focused ETFs such as the aforementioned XLB and VAW. PSCM joins the PowerShares S&P SmallCap Consumer Staples Portfolio (NasdaqGS: PSCC) as being one of those small-cap ETFs that is the best in its respective sector this year. [This is 2013’s Best Consumer Staples ETF]
Although PSCM is a play on small-cap materials names, a group often thought to be highly speculative, the average market value of the fund’s 40 holdings is $1.34 billion, proving this fund is far from being penny stock-heavy. Nearly 47% of PSCM’s weight is allocated to growth names with the remainder tilted to small-cap value stocks, according to PowerShares data.
PSCM’s top-five holdings – PolyOne (NYSE: POL), HB Fuller (NYSE: HB), KapStone Paper (NYSE: KS), Balchem (NasdaqGM: BCPC) and Schweitzer-Maudit (NYSE: SWM) – combine for about 28% of the ETF’s weight. After a fee reduction announced earlier this year, PSCM charges 0.29% per year.