Smaller stocks are delivering big returns and the ERShares International Equity ETF (NYSEARCA: ERSX) is one exchange traded fund capitalizing on the trend. Yet despite a stellar run of late, small-caps have plenty of tailwinds at their backs.
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.
BlackRock, the world’s largest asset manager is overweight “the momentum factor, which tracks large- and mid-cap stocks with price action recently on the upswing, and the low-size factor, which follows large- and mid-cap companies with smaller-than-average market valuations,” reports Business Insider.
Small-Caps as a Rebounding Economy Play
Part of the allure with ERSX heading into the new year is that many market observers are increasingly bullish on cyclical stocks, a theme that can benefit small-caps. That also says that ERSX is a credible play on coronavirus vaccine developments.
Cyclicals and more economically sensitive sectors are leading the charge after promising results from the latest coronavirus vaccine candidate helped fuel optimism over a gradual economic recovery.
Recent data points indicate there are opportunities in consumer discretionary and other cyclical sectors. Recent performers that stood out have also been those that were previously hardest hit by the coronavirus-driven fallout in the markets.
“It’s no secret by now that cyclical stocks are poised for outperformance with an economic recovery on the way,” according to Business Insider.
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.
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.