Small-caps are sizzling to finish 2020 and some analysts believe the asset class is poised to shine in 2021, a scenario highlighting upside potential 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. Small-caps are forecast to notch significant earnings growth next year.
“If you look at the Russell 2000, it’s up 90% from the March 18 low. We now have two-thirds of the Russell 2000 trading 10% or more above their 200-day moving average,” said Jefferies equity strategist Steven DeSanctis. “The last time we saw that was September, 2009. Here, we had the big downturn like we did in ’08/’09. We had January, February, March and now we’re exploding to the upside.”
Advantages of the ERSX ETF
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.
“DeSanctis has a target of 2,050 on the small cap Russell 2000 for next year. It was trading at just about 1,900 Wednesday, off its recent all-time high of 1,935, and well above the 966 of March,” reports Patti Domm for CNBC.
The ERSX methodology is important at a time when small-cap valuations, as noted above, may be a bit stretched, a scenario fostered by volatile companies with lumpy earnings trends.
That’s important because smaller companies often sport higher leverage and are more rate-sensitive than their large-cap counterparts. Bolstering the case for ERSX are improving small-cap earnings revisions, confirming the group has some earnings momentum.
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.