This ETF Weeds Out Small-Cap Underperformers

Core Insights - The article discusses the shift in investor behavior from large-cap U.S. equities to U.S. small-cap stocks amid market volatility caused by President Trump's tariffs [1][2] - The Russell 2000 index, representing small-cap stocks, experienced significant inflows and a price increase of over 38% from its year-to-date low on April 8, outperforming the S&P 500 by five percentage points during the same period [2] Small-Cap ETF Analysis - The iShares Russell 2000 ETF (IWM) contains approximately 2,000 holdings, while the Vanguard Small-Cap ETF (VB) is more selective with 1,100 positions, indicating a trade-off between broad exposure and performance [3] - The iShares Core S&P Small-Cap ETF (IJR) adopts a strategy that focuses on financially viable companies, resulting in a narrower selection of 637 holdings [4][7] - Stocks in the IJR must be at least one year post-IPO and demonstrate a positive earnings track record, ensuring quality within the fund [5] Performance Metrics - Since its inception on June 2, 2000, the IJR has only experienced downturns exceeding 20% on five occasions, recovering swiftly each time and achieving a nearly 579% gain [6][7] - The IJR currently offers a dividend yield of 1.93%, equating to $2.29 per share annually, with a low expense ratio of 0.06% [7] Sector Allocation - The IJR's holdings primarily consist of companies with market caps between $300 million and $1 billion, focusing on top performers in the small-cap sector [8] - The fund has a significant allocation in financials (nearly 25%) and consumer discretionary stocks (over 16%), aligning with positive sector forecasts [8] Investor Sentiment - Institutional ownership of the IJR stands at nearly 67%, with a net inflow of $15.23 billion against $4.73 billion in outflows over the past year, indicating strong investor confidence [11] - The ETF has a consensus Moderate Buy rating from analysts, with no Sell or Strong Sell ratings assigned [11]