These are go-go days for small-cap stocks and the related exchange-traded funds. The widely followed Russell 2000 Index jumped 18.29% in November, good for its best monthly performance on record.
On Tuesday, the first trading day of December, nearly a dozen small-cap ETFs hit all-time highs. Some market observers believe recent small stock bullishness is more a start than a finish. In fact, Jefferies sees small caps, backed by 40% earnings growth, topping large-cap names next year.
With December looking it will be kind to stocks and with the aforementioned tailwinds in place for 2021, investors may want to consider any and all of the following small-cap ETFs over the near-term.
Invesco S&P SmallCap Information Technology ETF (PSCT)
The Invesco S&P SmallCap Information Technology ETF PSCT is one of the small-cap ETFs that hit an all-time high Tuesday, adding to a run that's seen the Invesco fund surge 23.66% over the past month.
PSCT, which tracks the S&P SmallCap 600 Capped Information Technology Index, holds 74 stocks, about half of which are semiconductor or software names. Combine those alluring industry exposures with an average market capitalization of $1.82 billion and it's not a stretch to say if mergers and acquisitions heat up next year, some PSCT holdings will be picked off, boosting the fund in the process.
WisdomTree U.S. SmallCap Dividend Fund (DES)
Small caps aren't often thought of as dividend destinations and the S&P SmallCap 600 Index came under considerable dividend duress alongside the S&P 500 earlier this year at the hands of the coronavirus pandemic. However, the WisdomTree U.S. SmallCap Dividend Fund DES is in recovery/rally mode.
The fund is higher by 16.23% over the past month, good for one of the best showings among all dividend ETFs. DES yields 3.38%, roughly double the dividend yield on the S&P SmallCap 600.
DES is an avenue for investors to generate income while positioning for a more extensive cyclical rebound because the financial services, industrial, real estate and materials sectors combine for two-thirds of the fund's roster.
IQ Chaikin U.S. Small Cap ETF (CSML)
The IQ Chaikin U.S. Small Cap ETF CSML is a hidden gem among small-cap ETFs, though up more than 20% over the past month, perhaps it shouldn't be hidden. CSML follows the NASDAQ Chaikin Power U.S. Small Cap Index and is a quantitative strategy rooted in the application of 20 factors spanning both fundamental and technical analysis.
None of the fund's components exceed weights of 0.50% and CSML doesn't lean too heavily toward either growth or value stocks as its top five sector weights, which combine for 79% of the fund, span both growth and value.
Disclosure: The author owns shares of DES.
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