In a widely documented trend, small-cap stocks are outperforming their large-cap counterparts this year. Year-to-date, the small-cap Russell 2000 Index is up 11.4 percent compared to an 8-percent gain for the S&P 500.
Some data points suggest small-cap stocks and exchange traded funds are not slowing down against their large-cap rivals.
What Happened
On Monday, another batch of small-cap ETFs hit record highs. The VictoryShares US Small Cap High Dividend Volatility Weighted ETF CSB was part of that group, extending its year-to-date gain to nearly 8 percent.
CSB, which debuted in July 2015, follows the CEMP US Small Cap High Dividend 100 Volatility Weighted Index. While CSB's name positions the fund as low volatility dividend product (it is), how the fund delivers reduced volatility differs from some traditional minimum volatility ETFs. For example, CSB member firms must be profitable for four consecutive quarters to be included in the fund.
Why It's Important
CSB's methodology is important because investors focusing on the fund's year-to-date returns may be apt to assume the fund is lagging for all the wrong reasons. Yet volatility strategies typically trail traditional weighting schemes in up markets while exposing investors to less downside when equities tumble.
Additionally, there is the income component. CSB's trailing 12-month dividend yield is 3.3 percent, or about 215 basis points more than the Russell 2000. CSB components are also evaluated based on six-month standard deviations, with the least volatile stocks receiving higher weightings in the fund.
CSB holds just 101 stocks, a comparatively small lineup relative to traditional diversified small-cap funds. Still, the VictoryShares product offers compelling valuation discounts relative to the Russell 2000 coupled with superior earnings growth and return on equity, according to issuer data.
What's Next
CSB is top-heavy at the sector level, with the financial services, industrial and consumer discretionary sectors combining for approximately 61 percent of the ETF's weight. Those three sectors combine for less than 47 percent of the Russell 2000.
CSB charges 0.35 percent per year, or $35 on a $10,000 investment.
Related Links:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
