With all the fanfare pertaining to short squeezes of stocks like GameStop (GME) and AMC Entertainment (AMC), it’s easy to see why some investors are getting interested in smaller stocks.
However, those are extreme situations that can take away as quickly as they reward. A safer, more practical idea is the ERShares International Equity ETF (NYSEARCA: ERSX).
ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its 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.
“Yet the trading frenzy may be a sign that the market is getting frothy with bubbles emerging in more places. Consequences are coming. More regulatory scrutiny of Reddit and other trading forums is almost certain; apps like Robinhood could impose new restrictions on short selling. And shorting a stock, betting against it, could become costlier; brokerages may raise fees and demand more collateral from traders who have borrowed shares to sell short,” reports Daren Fonda for Barron’s.
Why ERSX Is Ideal for Crazy Times in Finance
Investors have long focused on larger companies to stabilize their portfolios during economic and political uncertainty. But as we look to future opportunities, it may be time to consider smaller companies outside the large cap ecosystem.
Small cap investors already know that looking at equities outside the large cap universe can yield substantial gains, but one area they may not have considered is looking abroad.
International small caps are generally export-oriented, globally structured, innovative, and have a high to dominant share of a niche market, often one in which the U.S. counterparts don’t compete effectively.
Best of all, ERSX’s factor methodology steers investors clear of potential trouble spots and excessive market volatility.
“None of this (Reddit-driven short squeezing) is likely to end well. The gamification of trading will die down, partly because it’s fueling a bubble with no underlying support from measures of value, like sales or earnings. The average price target on GameStop is a comical $13.44. Earnings are forecast at $1.22 a share in 2022,” concludes 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.