Consequently, PRFZ may more effectively capture a mean reversion in valuations as cheaper stocks outperform expensive companies. Additionally, the fund emphasizes value stocks, which have historically outperformed growth stocks over the long-term. PRFZ shows a 17.7 price-to-earnings ratio and a 1.7 price-to-book, compared to the Russell 2000 Index’s 18.6% P/E and 1.9 P/B.
“This is a suitable core holding for long-term investors who can stomach a little extra volatility to profit from potential market mispricings, or a value risk premium,” Bryan added. “Over the long run, betting on value has paid off handsomely in nearly every market studied.”
The ETF also overweights financials at 22.2% of the underlying portfolio, followed by consumer discretionary 18.5%, information technology 17.1%, industrials 17.0%, health care 8.3%, materials 5.4%, energy 4.4%, consumer staples 4.0%, utilities 1.7% and telecom services 1.4%.
For more information on small-capitalization stocks, visit our small-cap category.
Max Chen contributed to this article.