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Should WisdomTree U.S. SmallCap Earnings Fund (EES) Be on Your Investing Radar?

Style Box ETF report for EES

Designed to provide broad exposure to the Small Cap Value segment of the US equity market, the WisdomTree U.S. SmallCap Earnings Fund (EES) is a passively managed exchange traded fund launched on 02/23/2007.

The fund is sponsored by Wisdomtree. It has amassed assets over $664.50 M, 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

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

While 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. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

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 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.49%.

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 Financials sector--about 20.70% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Match Group Inc (MTCH) accounts for about 1.81% of total assets, followed by Premier Inc (PINC) and Kemet Corp (KEM).

The top 10 holdings account for about 10.93% of total assets under management.

Performance and Risk

EES seeks to match the performance of the WisdomTree U.S. SmallCap Earnings Index before fees and expenses. The WisdomTree U.S. SmallCap Earnings Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the small-capitalization segment of the U.S. Stock Market.

The ETF has lost about -3.81% so far this year and is down about -2.53% in the last one year (as of 12/13/2018). In the past 52-week period, it has traded between $34.01 and $40.77.

The ETF has a beta of 1.10 and standard deviation of 16.19% for the trailing three-year period, making it a medium risk choice in the space. With about 812 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. SmallCap Earnings Fund carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, EES is a reasonable 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 Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $9.18 B in assets, Vanguard Small-Cap Value ETF has $12.33 B. IWN has an expense ratio of 0.24% and VBR charges 0.07%.

Bottom-Line

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.


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WISTR-US SC ERN (EES): ETF Research Reports
 
Match Group, Inc. (MTCH) : Free Stock Analysis Report
 
Kemet Corporation (KEM) : Free Stock Analysis Report
 
VIPERS-SC VALUE (VBR): ETF Research Reports
 
ISHARS-RS 2K VL (IWN): ETF Research Reports
 
Premier, Inc. (PINC) : Free Stock Analysis Report
 
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