iShares ETFs That Float Under the Radar
BlackRock Inc.'s iShares unit is obviously a leading force in the ETF business. The numbers tell the story.
As is the case in any investment class, however, there are under-the-radar securities that might be obscured by the headline makers.
This article highlights three iShares ETFs that track unique sub-segments of the investment universe and yet have been overlooked by investors. By “overlooked” I mean that within the vast iShares product line, these funds have managed to gather less than $100 million, despite being launched at least five years ago.
Babe Ruth, the home run king of baseball for most of the 20th century, hit 60 homers in 1927, which was more than any single team in the league hit that year. Interviewed after a game by reporters, Ruth was quoted as saying “60, count ‘em. Let some (expletive) beat that!” It was 34 years before anyone did.
BlackRock can feel the same way about its presence in the ETF business with 430 ETFs currently trading on U.S. exchanges. That’s nearly double any other issuer and nearly as many as the next two largest firms, First Trust and Invesco, in terms of the number of ETFs offered. The 430 ETFs means that BlackRock is behind approximately one out of every eight U.S.-listed ETF. Four hundred and thirty, count ‘em. Let some (expletive) beat that!
iShares ETFs: A Lot Under the Hood
I identified about 300 iShares ETFs in existence for at least five years. Fifty-five of them have at least $10 billion in assets, but another 50 have less than $200 million, including several that focus on a single country’s equity market.
So, it turns out BlackRock’s ETF megaplex is a microcosm of the industry itself, with a small number of funds gathering most of the assets. In fact, the combined total assets under management of the 238 smallest ETFs of those 300 is still less than that of iShares biggest fund, the $377 billion iShares Core S&P 500 ETF (IVV).
Size Does Not Always Matter With ETFs
Many of the smaller iShares ETFs may be intriguing to investors, though they may be tougher to identify, because investing is driven in large part by emotion. Part of emotion is feeling that what one is doing is popular. That translates to filtering out ETFs that are “too small,” even though they might contain some hidden gems that plug gaps for investors.
Here are a three funds that I found, among many others in the iShares lineup, that are worth calling attention to. In other words, don’t let their size fool you. All are under $200 million in assets.
iShares ETFs Under $200 Million in Assets
The iShares Asia/Pacific Dividend ETF (DVYA) allocates its $40 million portfolio across 50 stocks in all major sectors excluding real estate investment trusts. Stocks from Australia and Japan account for 65% of assets, and so this is not a “China-filled-but-named-Asia” fund, as many others tend to be. DVYA’s distribution yield is 6.6%, and its portfolio sells at 7.3 times trailing 12-month earnings.
The iShares North America Tech-Multimedia Network ETF (IGN) is a niche fund that focuses on a sub-section of the telecommunications sector: communications equipment providers based in the U.S. and Canada. This type of hyper-targeting may give a huge boost to an investment advisor’s stature with clients, as they are rewarded for doing the deeper dive for their benefit.
IGN’s miserable 2023 (down 15% to date) and negative earnings in the sector clearly make this one a contrarian research consideration, not a momentum play.
The iShares 1-3 Year International Treasury Bond ETF (ISHG) might be the timeliest consideration on this short list. The $77 million ETF tracks an index of Treasury bonds that mature in one to three years. But these are not U.S. Treasury bonds; these are issued from places other than the U.S., such as Europe, the U.K. and Asia. When the U.S. dollar finally reverses downward, the currency exposure of ISHG’s portfolio may be in a good position to benefit.
iShares, the Babe Ruth of the ETF Industry
Babe Ruth hit a lot of home runs, but he also struck out more than anyone in his era. So, when diving into these lesser known, more specific ETF areas, investors need to do their homework and determine the applicability of each ETF they scout.
This is the case even when hunting for ideas within the 400-plus ETFs overseen by the Babe Ruth of the ETF industry, iShares. Home runs are better than strikeouts, unless you were a pitcher, as Ruth was early in his legendary career.
