The resurgence of small-cap stocks is grabbing all of the headlines. More importantly, it’s stoking bets that the asset class will continue delivering the goods in 2021, a theme highlighting the benefits of the ERShares International Equity ETF (NYSEARCA: ERSX).
ERSX tracks 50 non-U.S. companies from around the world with market capitalizations between $300 million and $5 billion USD and the highest rank based on the six investment style factors. Small-caps are forecast to notch significant earnings growth next year.
One benefit of ERSX is that small-caps are usually focused on their home markets, a relevant point as COVID-19 vaccines make the rounds the world over.
“Smaller companies tend to get the majority of their revenue from within America’s borders. This geographic concentration makes them proxies for the U.S. economy, so good news—like the rollout of a Covid-19 vaccine—means small companies tend to behave with big vigor when the economic outlook brightens,” reports Steven Sears for Barron’s. “And the outlook has indeed brightened as it seems our long, national Covid-19 nightmare may finally be coming to an end sometime in 2021.”
The ERSX ETF Delivers a Deep Factor Strategy
The ERShares ETF selects the most entrepreneurial, primarily Non-US Small Cap, companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.
“Institutional investors would be increasingly interested in buying battered stocks, especially small-caps, as they locked in profits on highflying large-cap stocks like Apple (AAPL) and Amazon.com (AMZN),” according to Barron’s.
The size factor is one of the most durable themes in the factor space, but many investors often overlook the benefits of focusing on higher-quality small-cap equities. ERSX checks that box.
Then there’s the notion of the ‘January Effect’, a seasonal trend that often sees small-cap equities perform well in the first month of the year. If that repeats in 2021, ERSX could start the new year on an even stronger note.
For more on entrepreneurial strategies, visit our Entrepreneur ETF Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.