There’s an expansive world of international small-cap stocks to consider, a world many exchange traded funds overlook. Investors can rectify that narrow-mindedness with 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.
ERSX is relevant today as investors look for value outside the U.S. international diversification benefits.
“Over time, small-cap stocks have provided exposure to a segment of the equity market that has offered faster growth, good risk-adjusted returns, and relatively low correlation with larger-cap stocks and other asset classes. Yet often when investors make an allocation to the international markets they tend to ignore the substantial universe of smaller-cap stocks that are available overseas,” according to AMG.
A 6-Month Window, Factor Basis, and More
The ERShares matters now because we’re in the best six-month period in which to own stocks, a time frame that has historically favored small-cap equities. Investors looking to engage with smaller stocks with less risk and higher income opportunities can consider ERSX.
Additionally, ERShares uses a deep factor-based approach to unearth opportunities with international small-cap names.
“We incorporate a proprietary investment model which applies a global, bottom-up, and top-down filtering process. Our ‘entrepreneur’ factors utilize both qualitative and quantitative criteria,” according to ERShares. “We apply our criteria to identify publicly traded entrepreneurial companies. History has shown that our model is effective across different market caps and geographical locations. We focus on management and leadership.”
There are other reasons to consider ERSX.
“With international markets having languished for a decade, small-cap stocks trailing their large-cap peers despite a history of outperformance, and with trade tensions dominating headlines, international small-cap stocks are poised to outperform the US,” according to Seeking Alpha.
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.