Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the iShares Morningstar SmallCap Value ETF (ISCV), a passively managed exchange traded fund launched on 06/28/2004.
The fund is sponsored by Blackrock. It has amassed assets over $376.44 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.
Why Small Cap Value
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
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 2.15%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. 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 24.50% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Omega Healthcare Investors Reit In (OHI) accounts for about 0.41% of total assets, followed by Starwood Property Trust Reit Inc (STWD) and Unum (UNM).
The top 10 holdings account for about 3.95% of total assets under management.
Performance and Risk
ISCV seeks to match the performance of the MORNINGSTAR US SML CP BRD VLUE EXTD INDX before fees and expenses. The Morningstar US Small Cap Broad Value Extended Index comprises of small-capitalization U.S. equities that exhibit value characteristics.
The ETF has lost about -11.06% so far this year and is down about -6.36% in the last one year (as of 09/08/2022). In the past 52-week period, it has traded between $49.29 and $62.28.
The ETF has a beta of 1.24 and standard deviation of 32.12% for the trailing three-year period. With about 1241 holdings, it effectively diversifies company-specific risk.
IShares Morningstar SmallCap Value 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, ISCV is a good option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Value ETF (IWN) and the Vanguard SmallCap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $12.01 billion in assets, Vanguard SmallCap Value ETF has $23.09 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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 SmallCap Value ETF (ISCV): ETF Research Reports
Unum Group (UNM) : Free Stock Analysis Report
STARWOOD PROPERTY TRUST, INC. (STWD) : Free Stock Analysis Report
Omega Healthcare Investors, Inc. (OHI) : Free Stock Analysis Report
Vanguard SmallCap Value ETF (VBR): ETF Research Reports
iShares Russell 2000 Value ETF (IWN): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research