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Should WisdomTree U.S. SmallCap ETF (EES) Be on Your Investing Radar?

Style Box ETF report for EES

By
This story originally appeared on Zacks

Launched on 02/23/2007, the WisdomTree U.S. SmallCap ETF (EES) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Value segment of the US equity market.

- Zacks

The fund is sponsored by Wisdomtree. It has amassed assets over $667.94 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.77%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 27.10% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Navient Corp (NAVI) accounts for about 1.36% of total assets, followed by Flagstar Bancorp Inc (FBC) and United Natural Foods Inc (UNFI).

The top 10 holdings account for about 8.48% of total assets under management.

Performance and Risk

EES seeks to match the performance of the WisdomTree U.S. SmallCap Earnings Index before fees and expenses. The WisdomTree U.S. SmallCap 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.

The ETF has added about 34.19% so far this year and is up about 33.15% in the last one year (as of 12/24/2021). In the past 52-week period, it has traded between $38.54 and $53.68.

The ETF has a beta of 1.35 and standard deviation of 31.40% for the trailing three-year period, making it a medium risk choice in the space. With about 678 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, EES is a reasonable option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Value ETF (IWN) and the Vanguard SmallCap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $15.87 billion in assets, Vanguard SmallCap Value ETF has $26.42 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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

 

United Natural Foods, Inc. (UNFI): Free Stock Analysis Report

 

Flagstar Bancorp, Inc. (FBC): 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

 

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Zacks Investment Research