This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Micro-Cap Funds Under the Microscope

Stocks in this article: IWM IWC PZI

NEW YORK ( TheStreet) -- In the first months of 2010, aiming small has paid off in a big way. Both small- and micro- cap ETFs have managed to handedly beat the broad S&P 500 Index.

Typically, investors are attracted to small- and micro-cap companies for their greater growth potential. However, as the size of the companies underlying a fund get smaller, they tend to see wilder swings to the up and downside. For this reason, it makes even more sense to diversify, especially with the smallest of small caps, the microcaps.

There are dozens of products available to investors looking for exposure to small-cap firms. However, the options for investors interested in micro-cap ETFs are limited. Currently, only three ETFs bear mention: the iShares Russell Microcap Index Fund (IWC); the PowerShares Zack's Micro Cap Portfolio (PZI); and the First Trust Dow Jones Select MicroCap Index Fund (FDM).

IWC is the largest of these three ETF options, with $440 million in assets.

Due to the small size of the fund's underlying holdings, IWC does not have any holding which can drive the product's performance. The fund's No. 1 position, Dana Holdings (DAN), accounts for only 0.7% the total index.

Together, IWC's top 10 positions make up less than 5% of the fund. Other top holdings include, Veeco Instruments (VEC), Arvinmeritor (ARM), and Dollar Thrifty Automotive Group (DTG).

The largest sectors represented in IWC's portfolio are financial services, technology, health care and consumer discretionary. Together, these four industries account for nearly three quarters of the fund. Financials represent the largest slice, commanding over 23%.

IWC carries a 0.68% expense ratio.

PZI also has a heavily diversified index. Keryx Biopharmaceuticals (KERX) is the fund's largest holding, but makes up less than 0.5% of the total index. Other top holdings include RAIT Financial Trust (RAS), Federal Agricultural Mortgage Corp (AGM) and Power-One (PWER). PZI's top 10 positions represent 4% of the fund.

Once again, a small number of sectors make up the lion's share of PZI's portfolio. This time, however, it is consumer discretionary, with a 23% slice, making up the largest chunk. Financials, technology and industrials together represent another 50% of the fund.

PZI carries a 0.86% expense ratio.

With nearly $23 million in assets, FDM is the smallest of the micro-cap ETFs. The fund's three top holdings: EV Energy Partner (EVEP), ATP Oil & Gas (ATPG), and Belo (BLC) each represent 1% of the fund. Together, FDM's top 10 holdings make up over 9% of the fund.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs