Small-caps are leading markets higher around the world, a scenario putting the ERShares International Equity ETF (NYSEARCA: ERSX) directly in the spotlight. The fund covers global bases with smaller stocks.
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.
“Shares of small U.S. companies have surged past their larger peers for 2020 after last month’s furious rally carried into December,” reports Karen Langley for the Wall Street Journal. “Fueled by improving expectations for the economy, thanks to promising Covid-19 vaccine trials, the Russell 2000 small-cap index notched its best-ever month in November. Then it kept rising. So far in December it has advanced 5%, well ahead of the 1.2% rise in the S&P 500 large-cap benchmark. Many investors expect small-cap stocks to continue leading the way.”
The ERSX ETF Is Leading the Recent Charge
ERSX offers a focused approach to small-cap equities, one that includes international names. That’s a prime advantage as many competing funds are U.S.-only products.
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.
“The Russell 2000’s gain for the year surpassed that of the S&P 500 on Tuesday for the first time in 2020, according to Dow Jones Market Data,” according to the Journal. “The small-cap gauge is now up 15% this year, compared with a 13% gain for the large-cap index. If the Russell 2000 maintains its edge, it would outperform the S&P 500 for the first time since 2016, according to Dow Jones Market Data. Both indexes still trail the technology-focused Nasdaq Composite, which is up 38%.”
Bolstering the case for ERSX are improving small-cap earnings revisions, confirming the group has some earnings momentum.
“Small-caps typically do well during economic recoveries, and the encouraging reports about vaccine candidates have contributed to an expectation that hard-hit industries will bounce back next year,” adds the Journal.
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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.