Small-cap equities are showing significant signs of promise in recent weeks, underscoring why investors should examine unique methodologies, including 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.
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.
ERSX merits near-term consideration and investors may not want to wait to hop aboard.
A Good Time for ERSX?
Small-cap companies could be well-positioned to benefit from a COVID-19 economic recovery. During downturns, small stocks typically underperformed, partially because they have fewer buffers to survive economic shocks. However, smaller companies have rewarded investors for their higher risk over full market cycles. Furthermore, the size factor may be a particularly useful investment in the current economic climate since it has typically outperformed during the recovery period of an economic cycle relative to other factors.
“Market strategists have been touting small-caps in recent weeks. Their earnings declines in the third quarter were less drastic than those of large-caps, and their earnings estimates for next year have been raised higher than large-cap revisions. As stocks fell to end October, small-caps didn’t fall as much,” according to Barron’s.
While the long-term large cap outperformance versus small caps is apparent, particularly in the last few years, things change when the economy goes south. Since the pandemic sell-offs in March, small caps have rebounded to a greater degree than their large cap brethren.
“If economic output reaches pre-pandemic levels, smaller companies might benefit the most. But both small-caps and mid-caps may be poised for a near-term breakout. The S&P 400 Mid Cap index, which had touched the 2000 level a few times over the past few weeks, busted through that level Monday,” reports Barron’s.
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.