With small-cap stocks soaring to end 2020, both the growth and value factors are shaping up well. The ERShares International Equity ETF (NYSEARCA: ERSX) provides a unique avenue to both factors.
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms. That’s good news for ERSX.
“Small-cap value has surged back in the fourth quarter, but it still has a long way to go to recoup years of relative underperformance,” writes Morningstar analyst Linda Mushrefova. “The Russell 2000 and Russell 2000 Value indexes rose 18.4% and 19.3%, respectively in November, their best absolute gains since their December 1978 inceptions. The Russell 2000 Growth Index, however, posted a strong 17.6% rise itself and remained far ahead of both its sibling benchmarks for the year and over longer trailing periods through November.”
ERSX Delivers the Best of Both Worlds
ERSX 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.
Building wealth can be a painstaking process in a world where most are seeking immediate returns. Yet for those brimming with discipline, small increments allocated towards investing can pay off, especially when applied to a small cap value-added strategy such as ERSX.
“There have been some signs of froth, such as the unraveling private office leasing firm WeWork’s lofty valuation before its aborted IPO and Tesla’s (TSLA) phenomenal rise. But the markets, while exuberant, are arguably not irrational,” according to Mushrefova.
While small-cap value appears to be solidifying, that doesn’t mean small-cap growth is going to lag. Fortunately, ERSX addresses both factors.
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.