Should iShares Morningstar Small-Cap Growth ETF (ISCG) Be on Your Investing Radar?
If you're interested in broad exposure to the Small Cap Growth segment of the US equity market, look no further than the iShares Morningstar Small-Cap Growth ETF (ISCG), a passively managed exchange traded fund launched on 06/28/2004.
The fund is sponsored by Blackrock. It has amassed assets over $389.58 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Also, growth stocks are a type of equity that carries more risk compared to others. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.06%, making it the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.88%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 21.10% of the portfolio. Industrials and Healthcare round out the top three.
Looking at individual holdings, Lattice Semiconductor Corp (LSCC) accounts for about 0.55% of total assets, followed by Penumbra Inc (PEN) and Renaissancere Holding Ltd (RNR).
Performance and Risk
ISCG seeks to match the performance of the MORNINGSTAR US SML CP BRD GRWTH EXTD ID before fees and expenses. The Morningstar US Small Cap Broad Growth Extended Index comprises of small-capitalization U.S. equities that exhibit growth characteristics.
The ETF has added about 3.94% so far this year and is down about -10.64% in the last one year (as of 03/13/2023). In the past 52-week period, it has traded between $33.74 and $45.42.
The ETF has a beta of 1.09 and standard deviation of 30.56% for the trailing three-year period. With about 1140 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Morningstar Small-Cap Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, ISCG is a great option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $9.03 billion in assets, Vanguard Small-Cap Growth ETF has $12.62 billion. IWO has an expense ratio of 0.23% and VBK charges 0.07%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares Morningstar Small-Cap Growth ETF (ISCG): ETF Research Reports
RenaissanceRe Holdings Ltd. (RNR) : Free Stock Analysis Report
Lattice Semiconductor Corporation (LSCC) : Free Stock Analysis Report
iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
Penumbra, Inc. (PEN) : Free Stock Analysis Report
Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports
