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Is WisdomTree U.S. SmallCap ETF (EES) a Strong ETF Right Now?

The WisdomTree U.S. SmallCap ETF (EES) made its debut on 02/23/2007, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $611.31 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Value. EES is managed by Wisdomtree. This particular fund 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.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.38% for EES, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0.97%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Representing 25% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Consumer Discretionary round out the top three.

When you look at individual holdings, Navient Corp (NAVI) accounts for about 1.33% of the fund's total assets, followed by Odp Corp/the (ODP) and Big Lots Inc (BIG).

The top 10 holdings account for about 7.89% of total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. SmallCap ETF has gained about 26.85% so far, and was up about 83.10% over the last 12 months (as of 07/12/2021). EES has traded between $27.48 and $51.33 in this past 52-week period.

EES has a beta of 1.43 and standard deviation of 31.23% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 693 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 Value ETF (IWN) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $16.30 billion in assets, Vanguard SmallCap Value ETF has $24.18 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value.

Bottom Line

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 ETF (EES): ETF Research Reports
 
The ODP Corporation (ODP): Free Stock Analysis Report
 
Big Lots, Inc. (BIG): Free Stock Analysis Report
 
Navient Corporation (NAVI): Free Stock Analysis Report
 
Vanguard SmallCap Value ETF (VBR): ETF Research Reports
 
iShares Russell 2000 Value ETF (IWN): ETF Research Reports
 
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