The Zacks Analyst Blog Highlights: Guggenheim Russell 2000 Equal Weight ETF, WisdomTree SmallCap Earnings ETF and WisdomTree SmallCap Dividend Fund

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Oct 21, 2014, 09:30 ET

CHICAGO, Oct. 21, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Guggenheim Russell 2000 Equal Weight ETF (AMEX:EWRS-Free Report), WisdomTree SmallCap Earnings ETF (AMEX:EES-Free Report) and WisdomTree SmallCap Dividend Fund (AMEX:DES-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

3 Outperforming Small-Cap ETFs for a Choppy Market

The broad stock market is having trouble finding its footing this quarter due to mountain of woes and increased volatility. The S&P 500 and the Dow Jones have fallen drastically from their peak reached in September and eroded most of their outsized gains made this year, pushing the indices slightly in the green from the year-to-date look.

While large cap stocks have been badly hit, small caps, which lost their long-lasting preference early in the year, have regained their sheen and are currently outperforming the broad U.S. market. This is because the confidence in the international economy is fading and geopolitical tensions loom large (read: Is the Worst Over for Small Cap ETFs?).

Both developed markets like Japan and Europe as well as developing markets like China and Brazil are experiencing a slowdown, with Europe in the danger of falling into another recession despite the stimulus package. Further, a strong dollar and the outbreak of Ebola virus also added to the woes.

In the current fear-ridden world, the U.S. economy is showing substantial improvements defying weak global conditions. This is especially true given that the recent jobless claim reading fell to the 14-year low and the homebuilding sector has rebounded with the rise in housing starts and building permits for the last month. Manufacturing and industrial activity also picked up last month.

Though retail sales dipped 0.3% in September indicating sluggish spending by the Americans, consumer sentiment elevated to the highest level in more than seven years according to the latest survey from Thomson Reuters/University of Michigan. All these suggest that the world's largest economy is definitely on the mend and will likely overcome the global slowdown, benefiting small caps the most.

The trend has already started to build up lately in the space given that the ultra-popular small cap ETF pulled in over $2.9 billion last week versus capital outflows of $1.3 billion for the large cap ETF and $1.1 billion for the mid cap ETF. This is especially true as these pint-sized stocks aren't big enough to be international behemoths and generate most of their revenues from the domestic market, making them great choices in a global slowdown.

Given this, small caps seem to be the perfect choice in the present scenario where the American economy is arguably leading the way. Further, since these companies are small, they are poised to grow higher than their already tapped out large cap counterparts. Below, we have highlighted three ETFs that are easily crushing the overall market amid the ongoing turmoil (see: all the Small Caps ETFs here).

These products are not confined to any particular sector but target the broad small cap segment of the U.S. equity market. In addition, these have a decent Zacks ETF Rank of 3 or 'Hold' rating.

Guggenheim Russell 2000 Equal Weight ETF (AMEX:EWRS-Free Report)

This fund offers equal weight exposure to a broad basket of 1,959 securities by tracking the Russell 2000 Equal Weight Index. None of the firms account for more than 0.45% of total assets. Sector wise, the ETF looks well diversified with consumer staples, utilities, financial services, consumer discretionary, and producer durables occupying the top five positions with 11% share each.

The product is often overlooked by investors as depicted by its AUM of $37.8 million and average daily volume of roughly 7,000 shares. The ETF charges 75 bps in fees and expenses and surged 3.2% over the past week.

WisdomTree SmallCap Earnings ETF (AMEX:EES-Free Report)

This fund targets the earnings-generating small cap companies by tracking the WisdomTree SmallCap Earnings Index. Holdings 868 stocks in its basket, the ETF provides a nice balance across various securities as each firm holds less than 1.20% share in the basket (read: 4 Ways to Play Earnings Growth with ETFs).

However, the fund is slightly tilted toward the financial sector at 23.8%, followed by consumer discretionary (18.5%) and industrials (18.3%). The product has amassed $386.1 million in its asset base and sees light volume of 35,000 shares per day. It charges 38 bps in annual fees and has added nearly 3% over the past five days.

WisdomTree SmallCap Dividend Fund (AMEX:DES-Free Report)

This ETF is one of the popular choices in the small cap value space with AUM of $980.4 million and trades in moderate volume of 64,000 shares per day. Expense ratio came in at 0.38%. The fund follows the WisdomTree SmallCap Dividend Index, holding a large basket of 678 securities (read: Investor Guide to Small-Cap Value ETFs).

The product is widely spread out across each security as none of these holds more than 1.97% share. From a sector look, financials take the top spot at 26.9% while industrials, utilities, consumer discretionary and information technology round off the top five with double-digit exposure. The fund is up 2.9% over the past five trading days.

Bottom Line

These products have been major beneficiaries of the current market trends and are likely to continue doing so as long as volatility remains in the market and the U.S. economy continues to improve.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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