ETF Spotlight: Equal-Weight, Small-Cap Earnings Strategy | ETF Trends

ETF spotlight on the ETFS Zacks Earnings Small-Cap U.S. Index Fund (NYSEArca: ZSML), part of an ongoing series.

Assets: $2.8 million

Objective: The Zacks Earnings Small-Cap U.S. Index Fund tries to reflect the performance of the Zacks Earnings Small-Cap U.S. Index, which selects stocks based on the analysis of their earnings through a quantitative model, Zacks Rank, a qualitative approach and Zacks Quality screens.

Holdings: Top holdings include Goodyear Tire & Rubber (NasdaqGS: GT) 6.6%, B/E Aerospace (NasdaqGS: BEAV) 6.8%, Spirit AeroSystems Holdings (NYSE: SPR) 6.7%, Dynegy (NYSE: DYN) 2.3% and TECO Energy (NYSE: TE) 2.3%.

What You Should Know:

  • ETF Securities sponsors the fund.
  • ZSML has a 0.66% expense ratio.
  • The ETF has 148 holdings, and the top ten components make up 31.2% of the overall portfolio.
  • The fund began trading January 20, 2015.
  • ZSML is up 6.8% since inception.
  • The fund follows a customized, smart-beta index that targets small U.S. stocks and equally weights both component holdings and sectors tilts.
  • The ETF has about a 6.5% to 6.9% tilt toward 15 sectors, including oil/energy, consumer staples, basic materials, finance, utilities, retail/wholesale, construction, aerospace, industrial products, consumer discretionary, medical, computer & technology, business services, autos/tires/trucks and transportation.
  • The fund also includes a earnings focus, which tilts toward more attractively valued stocks.
  • ZSML picks components based on quantitative model, Zacks Rank, a qualitative approach and Zacks Quality screens.
  • The Zacks Rank refers to earnings estimates by sell-side analysts and holdings the highest ranking to stocks that have the most significant positive changes in earnings estimates.
  • Zacks Quality refers to the amount of non-cash components, or accruals, in each company’s reported earnings, and only 10% of firms with the lowest sector-adjusted accruals are eligible for inclusion.
  • Potential investors should be aware that the fund is relatively new, so one should utilize limit orders to better control trades.