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Should IQ Chaikin U.S. Small Cap ETF (CSML) Be on Your Investing Radar?

Zacks Equity Research
Updated
Net income ratio gives us the exact profit level of a company

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the IQ Chaikin U.S. Small Cap ETF (CSML) is a passively managed exchange traded fund launched on 05/16/2017.

The fund is sponsored by Indexiq. It has amassed assets over $490.08 M, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

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Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.70%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 27.80% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Renewable Energy Group Inc (REGI) accounts for about 0.99% of total assets, followed by Health Insurance Innovatio-A (HIIQ) and Fossil Group Inc (FOSL).

The top 10 holdings account for about 7.84% of total assets under management.

Performance and Risk

CSML seeks to match the performance of the NASDAQ Chaikin Power US Small Cap Index before fees and expenses. The NASDAQ Chaikin Power US Small Cap Index is a rules-based, quantitative index designed to enhance the NASDAQ US 1500 Index, by selecting stocks with the highest Chaikin Power Gauge rating.

The ETF has lost about -1.04% so far this year and is up roughly 2.22% in the last one year (as of 10/05/2018). In the past 52-week period, it has traded between $26.59 and $29.80.

The ETF has a beta of 0.71 and standard deviation of 13.99% for the trailing three-year period. With about 214 holdings, it effectively diversifies company-specific risk.

Alternatives

IQ Chaikin U.S. Small Cap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, CSML is a sufficient option for those seeking exposure to the Small Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Core S&P Small-Cap ETF (IJR) and the iShares Russell 2000 ETF (IWM) track a similar index. While iShares Core S&P Small-Cap ETF has $45.37 B in assets, iShares Russell 2000 ETF has $49.25 B. IJR has an expense ratio of 0.07% and IWM charges 0.19%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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IQ-CHKN US SC (CSML): ETF Research Reports
 
ISHARS-R 2000 (IWM): ETF Research Reports
 
ISHARS-SP SC600 (IJR): ETF Research Reports
 
Health Insurance Innovations, Inc. (HIIQ) : Free Stock Analysis Report
 
Fossil Group, Inc. (FOSL) : Free Stock Analysis Report
 
Renewable Energy Group, Inc. (REGI) : Free Stock Analysis Report
 
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Zacks Investment Research