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Should iShares Morningstar Small-Cap ETF (JKJ) Be on Your Investing Radar?

Zacks Equity Research
MasTec's (MTZ) strong backlog and accretive acquisitions bode well for its future earnings prospects.
MasTec's (MTZ) strong backlog and accretive acquisitions bode well for its future earnings prospects.

The iShares Morningstar Small-Cap ETF (JKJ) was launched on 06/28/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Blackrock. It has amassed assets over $226.81 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

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

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 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.46%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 19.70% of the portfolio. Industrials and Real Estate round out the top three.

Looking at individual holdings, Molina Healthcare Inc (MOH) accounts for about 1.42% of total assets, followed by Pbf Energy Inc Class A (PBF) and Haemonetics Corp (HAE).

The top 10 holdings account for about 8.64% of total assets under management.

Performance and Risk

JKJ seeks to match the performance of the Morningstar Small Core Index before fees and expenses. The Morningstar Small Core Index measures the performance of stocks issued by small-capitalization companies.

The ETF has lost about -5.98% so far this year and is down about -1.29% in the last one year (as of 10/26/2018). In the past 52-week period, it has traded between $159.12 and $186.23.

The ETF has a beta of 1.01 and standard deviation of 14.14% for the trailing three-year period, making it a medium risk choice in the space. With about 260 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar 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, JKJ is a good 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 $41.57 B in assets, iShares Russell 2000 ETF has $44.74 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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ISHARS-MO SC (JKJ): ETF Research Reports
 
ISHARS-R 2000 (IWM): ETF Research Reports
 
ISHARS-SP SC600 (IJR): ETF Research Reports
 
Haemonetics Corporation (HAE) : Free Stock Analysis Report
 
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
 
PBF Energy Inc. (PBF) : Free Stock Analysis Report
 
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