After disappointing investors through 2017’s earlier stages, U.S. small-cap stocks and the relevant exchange traded funds have recently been gaining momentum. Investors reconsidering smaller companies have scores of options to mull over, but one of the more unique small-cap ETFs is the Oppenheimer Small Cap Revenue ETF (NYSEArca: RWJ).
RWJ follows a revenue weighting methodology, which could provide diversified exposure to the market, is not influenced by stock price, reflects a truer indication of a company’s value and offers stable sector exposure. Moreover, revenue weighting may provide a more value-oriented portfolio and historically outperformed in a value-driven market while showing lower drawdowns during growth-driven markets.
RWJ has recently been gaining momentum as highlighted by a one-month gain of 8.3%. Furthermore, small-cap stocks were strengthening as traders renewed their outlook on the Trump administration’s pro-growth agenda. In recent weeks, U.S. markets have been roiled over uncertainty concerning President Donald Trump’s ability to push through pro-growth economic policies through Congress as the White House wades through political intrigue. However, the small-cap segment is recovering on expectations that the administration could overhaul the U.S. tax policy.
Because of the revenue-weighting characteristic, a fund strategy tilts away from potentially overvalued momentum stocks and leans more toward low valuation companies with low price-to-book. The revenue-weight factor could also provide a better or more diversified way for investors to participate in the markets over the long haul.