Over the last week or so we’ve seen some rotation out of tech stocks and into S listed small caps. Now make no mistake a little over a week does not make any sort of trend but we’ve been getting questions about a US small cap TF and there is the iShares Russell 2000 ETF (NYSE code: IWM).

This tracks the Russel 2000 index and is billed but he issuer as offering “Exposure to small public U.S. companies”.

Importantly small is relative. The largest holding is Inside with a market cap of US$12.3billion, about R225billion so about the size of Anglogold Ashanti.

The sector breakdown is interesting with tech (IT) at only 13%. The largest sector is financials at almost 18%, health care 17.5% and industrials at 17.1%. It is hugely diverse, as one would expect, the top ten holdings are only 3.34% of the ETF.

As far as valuation goes the PE is 15.6x and price-to-book (PB) is 1.9x. Compared to Nasdaq 100 PE of 38.9x and PB 16.7x while the S&P500 PE is 27.7x and PB 4.7x. So yes the Russel 2000 is cheap, or rather cheaper. But cheap doesn’t always win.

IWM weekly chart | Close 22 July 2024

There is no local US small cap ETF, but there is an Actively Managed Certificate run by Keith McLachlan from Integral Asset Management. The code is UUGSMC* and it is an active AMC tracking global small caps with the largest in the universe around US$15billion. We have a video on it here.

Simon Brown

* I hold ungeared positions.

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At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.