Roger Nusbaum
iShares Morningstar Small-Value Index Fund(JKL Quote - Cramer on JKL - Stock Picks): I have been critical of all the Morningstar ETFs as being the poster child for the "me too" funds that have come out in the last couple of years. JKL offers a good yield (2.26%) but, according to the iShares Web site, it has zero in technology. As with VBR, when tech turns and leads again, this fund could lag badly. The process for the fund's composition is proprietary, so there is not much detail. While it is possible that tech could be added in the future (as the other funds show there are some value names in tech), owning this fund could amount to a bet that the managers will know when to add tech to the holdings.
As are many of the funds listed, streetTracks DJ Wilshire Small-Cap Value Index Fund(DSV Quote - Cramer on DSV - Stock Picks) is heavy in financials, has a slightly better yield than IWN and lags IWN by a few percentage points. Like most of the funds, DSV is heaviest in financials, but DSV has the highest yield of the group at 2.92%, but the extra yield does not overcome the performance lag. Most of the funds have very little volume, and Rydex S&P Small-Cap 600 Pure Value(RZV Quote - Cramer on RZV - Stock Picks), the newest entrant into the space, has by far the least volume. Its performance puts it right in the middle of the pack, but it has been trading for only six months. The biggest red flag for this fund is that consumer discretionary is the largest sector at 23.7%. Discretionary stocks tend to lag during an economic slowdown or recession. If we are slowing down, RSV could lag the others. The idea of only one product to capture the U.S. market is, as I mentioned above, not something I would suggest to anyone, but the history of this part of the market is compelling, as it is overlooked by too many investors. Small-caps have outperformed for this entire decade, save for the last couple of months; so while it may be the wrong time to favor small-caps, ignoring the asset class entirely has been the wrong thing to do far more often than not.| Seven ETFs That Capture Small-Cap Value |
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| Source: BigCharts.com |
Please note that due to factors including low market capitalization and/or insufficient public float, we consider PowerShares Dynamic Small-Cap Value, Vanguard Small-Cap Value Vipers, iShares Morningstar Small-Value Index Fund, streetTracks DJ Wilshire Small-Cap Value and Rydex S&P Small-Cap 600 Pure Value to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
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