A Different, Stealthier Spin on the January Effect

The average market value of IWC’s 1,358 holdings was $420 million at the end of the third quarter while PZI’s 400 components had an average market cap of $489 million at the end of last year. WMCR was more true to the micro-cap definition with its 953 holdings having an average market value of $252 million at the end of the third quarter, according to Guggenheim data.

What cannot be quibbled with is that these ETFs are benefiting from having the right sector mixes at the right time. That means substantial allocations to financial services and health care (really biotechnology at the micro-cap level) stocks.

The combined weights to those sectors for the aforementioned ETFs are as follows: 48% for WMCR, almost 45% for IWC and over 39% for PZI. Small and micro-cap community and regional banks are seen as winners in rising interest rate environments because of the boost rising rates can provide to the net interest margins of those banks.

The average number of health care stocks in the top-10 holdings of IWC, PZI and WMCR is 4.6, indicating these funds offer decent leverage to the ongoing ebullience surrounding the biotech industry. [Small Stocks Could Mean Big Things for This Biotech ETF]

Guggenheim Wilshire Micro-Cap ETF

Tom Lydon’s clients own shares of IWC and IWM.