Top 10 International Small-Cap ETFs

Inrecent years previous to 2011, one of the primary trends for ETF investors wasto internationalize their portfolios. This was believed to provide morediversification, and at the same time, add exposure to economies with superiorgrowth prospects. From a performance perspective this proved rewarding untilglobal markets, particularly debt ridden eurozone economies, suffered seriousdeclines.

Small-cap sectors have always exhibited the highest volatility (beta) characteristics as markets trend higher or lower. When markets trend higher outperformance is generally exhibited and the opposite occurs as trends reverse. The latter held true in 2011 as markets declined and investors halted fund flow and reversed course.

Selecting the Top 10 ETFs within declining markets may seem odd but our objective is to find those issues that are well-structured and, as conditions may improve in the future, offer suitable choices given the many ETFs in this sector.

We rank the top 10 ETF by our proprietary stars system as outlined below. If an ETF you're interested in is not included but you'd like to know a ranking send an inquiry to support@ETFDigest.com and we'll attempt to satisfy your interest.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

To add value, we feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

 

#1: iShares EAFE Small-Cap ETF (SCZ)

SCZ follows the MSCI EAFE Small-Cap Index follow the performance of small-cap stocks in European, Australasian and Far Eastern markets. The fund was launched in December 2007. The expense ratio is .40%. AUM (Assets under Management) equal $1.2 billion and average daily trading volume is 397K shares. (AUM fell by $300M from July and trading volume increased by over 100K indicating distribution.) As of early January 2012 the annual dividend yield was 3.27% and YTD return -.03%.

Data as of First Quarter 2012

SCZ Top Ten Holdings &Weightings
  1. Bilfinger Berger SE (GBF): 0.40%
  2. APA Group (APA): 0.39%
  3. PSP Swiss Property AG (PSPN): 0.37%
  4. Gemalto (GTO): 0.36%
  5. Pennon Group PLC (PNN): 0.36%
  6. Davide Campari-Milano S.p.A. (CPR): 0.35%
  7. SGL Carbon AG (SGL): 0.35%
  8. Filtrona PLC (FLTR): 0.34%
  9. Elekta AB (EKTA B): 0.34%
  10. Nishi-Nippon Railroad Co., Ltd. (9031): 0.33%

 

 

 

#2: SPDR International Small-Cap ETF (GWX)

GWX follows the S&P Developed ex-U.S. Under USD2 Billion Index which consists of investable publicly traded companies domiciled in the developed countries outside the U.S. The fund was launched in April 2007. The expense ratio is .59% (higher). AUM equal $664M and average daily trading volume is 188K shares. (This compares with $965 million and 115K shares in July also indicating distribution.) As of early January 2012 the annual yield was 2.97% and YTD return .20%.

Data as of First Quarter 2012

GWX Top Ten Holdings & Weightings
  1. Shochiku Co., Ltd. (9601): 0.76%
  2. Belimo Holding AG (BEAN): 0.72%
  3. InvoCare Limited (IVC): 0.67%
  4. Paddy Power PLC (PLS): 0.66%
  5. SAI Global Limited (SAI): 0.65%
  6. Rubis (RUI): 0.58%
  7. Cheil Worldwide Inc Common Stock Krw200.: 0.55%
  8. Haw Par Corporation Limited (H02): 0.53%
  9. Corus Entertainment, Inc. B (CJREF): 0.50%
  10. Cafe de Coral Holdings Ltd. (00341): 0.49%

 

 

#3: WisdomTree International Small-Cap ETF (DLS)

DLS follows the WisdomTree International SmallCap Dividend Index which is a fundamentally weighted index including small-cap dividend paying companies that compose the bottom 25% of market capitalization in the WisdomTree DEFA index after the 300 largest companies are removed. The fund was launched in June 2006. The expense ratio is .58%. AUM equal $365M and average daily trading volume is 32K. (In July 2011 AUM was $450 million and average daily trading volume was 30K shares also indicated some distribution but primarily a drop in asset value.) As of early January 2012 the annual dividend yield was 3.90% and YTD return .16%.

Data as of First Quarter 2012

DLS Top Ten Holdings & Weightings
  1. Cable & Wireless Communications PLC (CWIXF): 0.77%
  2. Provident Financial PLC (PFG): 0.61%
  3. Vector Limited (VCT): 0.60%
  4. Monadelphous Group Limited (MND): 0.57%
  5. Envestra Limited (ENV): 0.57%
  6. Adelaide Brighton Limited (ABC): 0.54%
  7. Consolidated Media Holdings Limited (CMJ): 0.54%
  8. CSR Limited (CSR): 0.51%
  9. Oesterreich Post AG: 0.49%
  10. Bank of Queensland Ltd. (BOQ): 0.48%

 

#4: Schwab International Small-Cap Equity ETF (SCHC)

SCHC follows the FTSE Developed Small-Cap ex-U.S. Liquid Index which consists of a small-cap universe of the bottom 10% of the eligible universe with a minimum free float capitalization of $150M. The fund was launched in January 2010. The expense ratio is .35% which is lower than most. AUM equal $140 million and average daily trading volume 39K shares. (This compares with AUM of $175 million and average daily trading volume of 43K shares in late June 2011.)  As of early January 2012 the annual dividend yield was 3.45% and YTD return .38%.

Data as of First Quarter 2012

SCHC Top Ten Holdings & Weightings
  1. Metro Inc. A (MRU.A): 0.49%
  2. Baytex Energy Corp (BTE): 0.48%
  3. Athabasca Oil Sands Corp (ATHOF): 0.45%
  4. New Gold, Inc. (NGD): 0.43%
  5. Franco-Nevada Corporation (FNV): 0.41%
  6. Inmet Mining Corporation (IEMMF): 0.39%
  7. Pembina Pipeline Corp (PBNPF): 0.38%
  8. Viterra, Inc. (VTRAF): 0.37%
  9. Centerra Gold Inc. (CAGDF): 0.36%
  10. ONEX Corp: 0.35%

 

#5: WisdomTree Japan Small-Cap ETF (DFJ)

DFJ follows the WisdomTree Japan SmallCap Dividend Index which once deleting the top 300 listed companies then remaining companies are included based on annual cash dividends paid. The fund was launched in June 2006. The expense ratio is .58%. AUM equal $185 million and average daily trading volume is 30K shares. (This compares with July 2011 when AUM was $270 million and average daily trading volume is 58K shares.) As of early January 2012 the annual dividend yield was 1.96% and YTD return -.31%.

Data as of First Quarter 2012

DFJ Top Ten Holdings & Weightings
  1. Park24 Co., Ltd. (4666): 0.82%
  2. Century Leasing System Inc. (CUASF): 0.61%
  3. Square Enix Holdings Co. Ltd. (9684): 0.60%
  4. Chiyoda Co., Ltd. (8185): 0.55%
  5. IT Holdings Corporation (ITHOF): 0.54%
  6. Yamatake Corp. (6845): 0.54%
  7. Circle K Sunkus Co., Ltd. (3337): 0.53%
  8. The Yokohama Rubber Co., Ltd. (5101): 0.53%
  9. Hikari Tsushin Inc. (9435): 0.53%
  10. Otsuka Corporation (4768): 0.52%

 

#6: SPDR Russell / Nomura Japan Small-Cap ETF (JSC)

JSC follows The Russell/Nomura Japan Small-Cap Index represents approximately the smallest 15% of stocks in terms of float-adjusted market capitalization of the Russell/Nomura Total Market Index. The expense ratio is .55%.  AUM equal $87 million and average daily trading volume is 13K shares. (This compares with July readings of AUM $131 million and average daily trading volume of 16K shares.) As of early January 2012 the annual dividend yield was 2.19% and YTD return of .39%.

Data as of First Quarter 2012

JSC Top Ten Holdings & Weightings
  1. Wacoal Holdings Corporation (3591): 0.66%
  2. Umenohana Co Ltd: 0.65%
  3. Musashi Seimitsu Iindustry Co., Ltd. (7220): 0.59%
  4. Kaken Pharmaceutical Co., Ltd. (4521): 0.57%
  5. Mabuchi Motor Co., Ltd. (6592): 0.57%
  6. Yamato Kogyo Co. Ltd. (YMTKF): 0.52%
  7. The Aichi BankLtd. (8527): 0.51%
  8. Taisei Lamick Co., Ltd. (4994): 0.50%
  9. Nissan Shatai Co., Ltd. (7222): 0.49%
  10. Penta-Ocean Construction Co., Ltd. (1893): 0.49%

 

#7: Van Eck Brazil Small-Cap ETF (BRF)

BRF follows the Market Vector Brazil Small-Cap Index which features companies domiciled and primarily listed on an exchange in Brazil or generate at least 50% of their revenues in Brazil. The fund was launched in May 2009. The expense ratio is .62%. AUM equal $523 million and average daily trading volume is 224K shares. (This compares to AUM of $890 million and average trading volume is 225K shares in July 2011.) As of early January 2012 the annual dividend yield was 2.54% and YTD return was 1.20%.

Data as of First Quarter 2012

BRF Top Ten Holdings & Weightings
  1. Totvs S.A. (TOTS3): 4.61%
  2. Klabin SA Pfd Shs (KLBN4): 3.79%
  3. Tam SA (TAM): 3.18%
  4. Gafisa SA ADR (GFA): 2.96%
  5. Br Properties Sa: 2.91%
  6. Santos Brasil Particpacoes SA: 2.72%
  7. Odontoprev S.A. (ODPV3): 2.59%
  8. Anhanguera Educacional Participacoes S.A. (AEDU3): 2.49%
  9. Sul America S.A. (SULA11): 2.46%
  10. Marcopolo S.A. (POMO3): 2.46%

 

#8: Guggenheim China Small-Cap ETF (HAO)

HAO follows the AlphaShares China Small-Cap Index which utilizes a third party proprietary enhanced index to identify constituents, adjust allocations and a minimum of $200 million in market capitalization. The fund was launched in January 2008. The expense ratio is .70%. AUM equal $142 million and average daily trading volume is 124K shares. (This compares to AUM of $270 million and average daily trading volume is 164K shares in July 2011.) As of early January 2012 the annual dividend yield was 3.19% and YTD return -1.55%.

Data as of First Quarter 2012

HAO Top Ten Holdings & Weightings
  1. Mindray Medical International Limited ADR (MR): 2.37%
  2. Tsingtao Brewery Co., Ltd. (TSGTF): 1.63%
  3. Guangdong Investment Ltd. (00270): 1.61%
  4. Zhaojin Mining Industry Co. Ltd. (01818): 1.57%
  5. Great Wall Motor Co., Ltd. (02333): 1.48%
  6. China BlueChemical Ltd. (03983): 1.46%
  7. Yingde Gases Group Co., Ltd. (2168): 1.44%
  8. China Shanshui Cement Group Limited (00691): 1.42%
  9. SOHO China Limited (00410): 1.30%
  10. China Everbright Ltd. (00165): 1.29%

 

#9: Index IQ Australia Small-Cap ETF (KROO)

KROO (Index IQ Australia Small-Cap ETF) follows the IQ Australia Small-Cap Index consisting of equities with the same strategy and constituents. The fund was launched in March 2010. The expense ratio is .69%. AUM equal $16 million and average daily trading volume is $31 million and average daily trading volume is 6K shares. (This compares to AUM in July 2011 of $31 million and average daily trading volume of 13K shares.) As of early January 2012 the annual dividend yield was 8.40% and YTD return 1.29%.

Data as of First Quarter 2012

KROO Top Ten Holdings & Weightings
  1. Ansell Limited (ANSLF): 2.84%
  2. UGL Limited (UGL): 2.80%
  3. Seek Limited (SEK): 2.67%
  4. Monadelphous Group Limited (MND): 2.47%
  5. Bank of Queensland Ltd. (BOQ): 2.32%
  6. Graincorp Limited (GNC): 2.22%
  7. PanAust Limited (PNA): 2.15%
  8. Primary Health Care Limited (PRY): 2.08%
  9. Adelaide Brighton Limited (ABC): 2.01%
  10. Aurora Oil & Gas Ltd. (AAGLF): 1.96%

#10: Index IQ Canada Small-Cap ETF (CNDA)

CNDA follow the index of the same name which is a market cap-weighted index tracking the overall performance of publicly traded companies domiciled and traded on a Canadian exchange. The fund was launched in March 2010. The expense ratio is .69%. AUM equal $33 million and average daily trading volume is 11K shares. (This compares with July 2011 AUM of $70 million and average daily trading volume is 46K shares.) As of early January 2012 the annual dividend yield was 1.20% and YTD return 3.16%.

Data as of First Quarter 2012

CNDA Top Ten Holdings & Weightings
  1. TMX Group, Inc. (TMXGF): 2.84%
  2. Open Text Corporation (OTEX): 2.77%
  3. Quadra FNX Mining Ltd. (QUX): 2.66%
  4. AltaGas Ltd. (ALA): 2.62%
  5. Provident Energy Ltd. (PVX): 2.49%
  6. Trican Well Service, Ltd. (TOLWF): 2.35%
  7. CAE, Inc. (CAE): 2.29%
  8. Progressive Waste Solutions Ltd (BIN): 2.15%
  9. Indus Alliance Insur and Finan Srvc, Inc. (IAG): 2.15%
  10. AuRico Gold Inc (AUQ): 2.07%

 

 

CONCLUSION

The ETFs chosen above represent products that are well structured even though the sector has suffered severe losses in both performance and AUM over the past 6 months. Eventually these most volatile of market sectors will have their day in the sun once again and investors might pick and choose which have the most appeal and useful application to their needs.

That said, investors do need to be cautious of those ETFs with serious losses in AUM perhaps making them business losers for the sponsors. As such investors need to pay close attention to this as some funds have been closed over the last few months.

Single country funds listed above have lower ratings than those with more geographical diversification thus allowing them a higher ranking from a risk management view.

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest has no current positions in the featured ETFs.

(Source for data is from ETF sponsors and various ETF data providers)

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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