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Is WisdomTree U.S. SmallCap ETF (EES) a Strong ETF Right Now?

Smart Beta ETF report for EES

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This story originally appeared on Zacks

The WisdomTree U.S. SmallCap ETF (EES) was launched on 02/23/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Value category of the market.

- Zacks

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Wisdomtree. EES has been able to amass assets over $647.79 million, making it one of the average sized ETFs in the Style Box - Small Cap Value. EES, before fees and expenses, seeks to match the performance of the WisdomTree U.S. SmallCap Earnings Index.

The WisdomTree U.S. SmallCap Earnings Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the small-capitalization segment of the U.S. Stock Market.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.38% for EES, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.09%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

EES's heaviest allocation is in the Financials sector, which is about 26.90% of the portfolio. Its Industrials and Consumer Discretionary round out the top three.

When you look at individual holdings, Navient Corp (NAVI) accounts for about 1.33% of the fund's total assets, followed by Odp Corp/the (ODP) and Big Lots Inc (BIG).

The top 10 holdings account for about 7.89% of total assets under management.

Performance and Risk

The ETF has added roughly 30.17% and is up about 53.99% so far this year and in the past one year (as of 10/18/2021), respectively. EES has traded between $30.71 and $51.33 during this last 52-week period.

The fund has a beta of 1.39 and standard deviation of 31.58% for the trailing three-year period, which makes EES a medium risk choice in this particular space. With about 693 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 Value ETF (IWN) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $16.77 billion in assets, Vanguard SmallCap Value ETF has $25.65 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.



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WisdomTree U.S. SmallCap ETF (EES): ETF Research Reports

 

The ODP Corporation (ODP): Free Stock Analysis Report

 

Big Lots, Inc. (BIG): Free Stock Analysis Report

 

Navient Corporation (NAVI): Free Stock Analysis Report

 

Vanguard SmallCap Value ETF (VBR): ETF Research Reports

 

iShares Russell 2000 Value ETF (IWN): ETF Research Reports

 

To read this article on Zacks.com click here.

 

Zacks Investment Research