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5 Small-Cap ETFs & Stocks Beating Russell 2000

Sweta Killa

After a tough 2018, the Wall Street bulls came back roaring this year. While the gains were broad-based gains, the small-cap stocks are outperforming. This is especially true as the Russell 2000 Index has risen 17.1% so far this year compared with gain of 10.7% for the S&P 500 and 15.4% for the S&P Mid Cap 400 Index (read: Small Caps Taking Charge of the Bulls: 6 ETF Winners YTD).

The outperformance was mainly driven by global issues like Brexit, trade war, global slowdown, slowing growth in Europe, Japan and China as well as geopolitical risk. This is because these stocks are closely tied to the U.S. economy and do not have much exposure to the international market. Notably, these pint-sized stocks are considered safer and better plays if political issues or economic turmoil creep into the picture, though these are highly volatile and could lead to huge losses in an erratic market.

Additionally, an encouraging domestic economic trend backs their momentum as these stocks generally outperform on improving U.S. economic health. Rising wages, subdued inflation, higher consumer confidence and increasing consumer spending bode well for the U.S. economy. All these combinations will support the bull market to complete its decade long run on Mar 9 this year. Further, the Fed comment that it is not in a hurry to raise rates this year also led to the outperformance of the pint-sized stocks.

Given this, there have been winners in several corners of the small cap space. Below we have presented five ETFs & stocks that have easily crushed the Russell 2000 index this year and are likely to continue their strong performance (see: all the Small Cap ETFs here).

Best ETFs

All these funds have a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), suggesting room for more upside.

Invesco S&P SmallCap Materials ETF PSCM – Down 12.6%

This fund targets the material sector offering exposure to companies that are principally engaged in the business of producing raw materials, including paper or wood products, chemicals, construction materials, and mining and metals. It follows the S&P SmallCap 600 Capped Materials Index (read: Why Materials & Mining ETFs Are Riding Higher).

Zacks ETF Rank: #3
AUM: $23 million
Expense Ratio: 0.29%
YTD Return: 28.1%

Oppenheimer S&P SmallCap 600 Revenue ETF RWJ

This product offers exposure to securities of the S&P SmallCap 600 but is weighted by revenues instead of market capitalization.

Zacks ETF Rank: #3
AUM: $474.8 million
Expense Ratio: 0.39%
YTD Return: 21.5%

Invesco S&P SmallCap Information Technology ETF PSCT

This ETF targets the U.S. information technology sector and tracks the S&P SmallCap 600 Capped Information Technology Index.

Zacks ETF Rank: #3
AUM: $337.1 million
Expense Ratio: 0.29%
YTD Return: 20.1%

Janus Henderson Small Cap Growth Alpha ETF JSML

This ETF follows the Janus Henderson Small Cap Growth Alpha Index, which systematically identifies Smart Growth companies utilizing a process based on Janus Henderson’s 45+ years of fundamental research. The strategy seeks to provide risk-adjusted outperformance by identifying top-tier small-cap companies with some of the strongest fundamentals that have proven operational excellence and represent the top 10% of the eligible universe (read: 4 Reasons to Bet on Top-Ranked Small-Cap Growth ETFs).

Zacks ETF Rank: #2
AUM: $27.9 million
Expense Ratio: 0.35%
YTD Return: 19.8%

Invesco S&P SmallCap Industrials ETF PSCI

This product follows the S&P SmallCap 600 Capped Industrials Index, which measures the performance of companies engaged in the business of providing industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace and defense and general manufacturing.

Zacks ETF Rank: #3
AUM: $73.3 million
Expense Ratio: 0.29%
YTD Return: 19.6%

Best Stocks

We have used the Zacks Stock Screener to find out the best-performing stocks in the small-cap space and then narrowed down the list considering a Zacks Rank #1 or 2 and a Growth Style Score of B or better.

The Growth Score analyzes the growth prospects of a company following a thorough analysis of the income statement, balance sheet and cash flow statement that evaluate its financial health and the sustainability of its growth trajectory. The results show that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.

NTN Buzztime Inc. NTN

This is a leading developer, publisher and distributor of interactive entertainment for massive audiences on numerous consumer platforms (read: Consumer Discretionary ETFs Leading This Earnings Season).

Zacks Rank: #2
Growth Score: A
Market Cap: $10.31 million
YTD Return: 84.1%

PCM Inc. PCMI

This is a technology solutions provider to businesses, government and educational institutions and individual consumers.

Zacks Rank: #2
Growth Score: B
Market Cap: $386.4 million
YTD Return: 80.6%

eGain Corporation EGAN

This provides customer engagement solutions offering web customer interaction applications, social customer interaction applications and contact center applications. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks Rank: #1
Growth Score: A
Market Cap: $318.37 million
YTD Return: 73.7%

Boot Barn Holdings Inc. BOOT

This operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories.

Zacks Rank: #1
Growth Score: A
Market Cap: $803.13 million
YTD Return: 66.5%

Sunshine Heart Inc CHFS

This is a medical device company, which focused on commercializing the Aquadex FlexFlow (R) System.

Zacks Rank: #2
Growth Score: B
Market Cap: $5.58 million
YTD Return: 59%

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