The ERShares International Equity ETF (NYSEARCA: ERSX) is a prime example of an exchange traded fund benefiting from investors’ recently renewed enthusiasm for small stocks. Fortunately, the longer-ranging outlook for small-cap equities is equally bright.
The ERShares ETF selects the most entrepreneurial, primarily non-U.S. 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.
“Wall Street small-cap market guru Steven DeSanctis is giving his most bullish forecast for the group in over a decade,” reports Maggie Fitzgerald for CNBC. “The Jefferies analyst estimates that benchmark Russell 2000 will rise more than 12% to top the 2,050 level in 2021. Next year’s call is Jefferies’ most bullish for the index since 2003.”
Small-Cap Analysis for 2021
Small-cap equities have been benefitting off of the rebound from the coronavirus sell-offs back in March, but investors can’t be too optimistic by the recent momentum. The question is whether it’s sustainable.
The size factor is one of the most durable themes in the factor space, but many investors overlook the benefits of focusing on higher-quality small-cap equities, including those residing in ERSX. Fortunately, investors don’t have to pay up for the privilege of embracing the ERShares fund.
“Valuations are very attractive, earnings, sales accelerating faster down cap, and we see M&A picking up, all boosting the size segment,” DeSanctis told clients. “We head into ’21 with a Value/Cyclical tilt with two favorite sectors being [Industrials and Materials].”
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.
“An acceleration in GDP and a pickup in M&A activity are pointing to a year of outperformance for the small and mid-sized companies. Jefferies sees a 4% pickup in GDP next year, which is historically bullish for small stocks which snap back the hardest during times of economic recovery,” according to CNBC.
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.