A Multi-Factor, Small-Cap ETF Opportunity to Enhance Returns

ETF investors seeking a way to target the growth potential of small-caps and a smart beta strategy to diversify risks may look to the IQ Chaikin U.S. Small Cap ETF (NasdaqGM: CSML), which tries to reflect the performance of the Nasdaq Chaikin Power US Small Cap Index. The underlying index incorporates the so-called Chaikin Power Gauge that combines four primary factors, including value, growth, technical and sentiment.

The value factor includes screens like LT debt to equity ratio, price to book value, return on equity, price to sales ratio and free cash flow. Technical factors cover price trend, price trend rate of change, relative strength vs. market and volume trend. Growth factors include earnings growth, earnings surprise, earnings trend, projected P/E ratio and earnings consistency. Lastly, the sentiment factor screens for earnings estimate trend, short interest, insider activity, analyst ratings and industry relative strength.

“The multi-factor approach – Chaikin Power Gauge – that CSML employs may help to diversify portfolio risk and seeks to select stocks with the potential to provide enhanced returns over time,” Bruno said.

Financial advisors who are interested in learning more about multi-factor, smart beta strategies can watch the webcast here on demand.