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Should WisdomTree U.S. SmallCap Fund (EES) Be on Your Investing Radar?

Sweta Killa

If you're interested in broad exposure to the Small Cap Value segment of the US equity market, look no further than the WisdomTree U.S. SmallCap Fund (EES), a passively managed exchange traded fund launched on 02/23/2007.

The fund is sponsored by Wisdomtree. It has amassed assets over $817.72 M, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

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.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.

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Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.38%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Consumer Discretionary sector--about 24.30% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, Lithia Motors Inc (LAD) accounts for about 1.26% of total assets, followed by Kb Home (KBH) and Dana Inc (DAN).

The top 10 holdings account for about 8.49% of total assets under management.

Performance and Risk

EES seeks to match the performance of the WisdomTree U.S. SmallCap Earnings Index before fees and expenses. The WisdomTree U.S. SmallCap Earnings Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the small-capitalization segment of the U.S. Stock Market.

The ETF has added roughly 18.99% so far this year and is up about 12.53% in the last one year (as of 12/11/2019). In the past 52-week period, it has traded between $30.28 and $38.39.

The ETF has a beta of 1.19 and standard deviation of 15.95% for the trailing three-year period, making it a medium risk choice in the space. With about 837 holdings, it effectively diversifies company-specific risk.

Alternatives

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

The iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $9.67 B in assets, Vanguard Small-Cap Value ETF has $14.23 B. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

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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WisdomTree U.S. SmallCap Fund (EES): ETF Research Reports
 
Lithia Motors, Inc. (LAD) : Free Stock Analysis Report
 
Dana Incorporated (DAN) : Free Stock Analysis Report
 
KB Home (KBH) : Free Stock Analysis Report
 
Vanguard Small-Cap Value ETF (VBR): ETF Research Reports
 
iShares Russell 2000 Value ETF (IWN): ETF Research Reports
 
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Zacks Investment Research