Trending Assets
Top investors this month
Trending Assets
Top investors this month
iShares Core S&P Small-Cap ETF $IJR
This an interesting blog post about Small Cap strength Vs Large Caps in a rising interest rate environment. (Link at bottom)
I've been looking to utilise ETFs in my Investment Portfolios.
TL;DR
Cheap valuation compared to SP500
- SP600 Small Cap: 12-month forward earnings of 12.6x Vs Long-term average of 17.1x
- Discount of 23% against SP500 current 12 month valuation of 16.4X
Less sensitive to rising interest rates
- Small caps historically outperformed large caps when rates rise. Held true during this cycle.
- 31% gain for small caps Vs 13% for Large Caps
Less sensitive to dollar strength
- $ Strength hits large caps as they derive 40% of sales from overseas Vs 21% for Small Caps
How to play
Excerpt from the blog;
- The S&P 600 index is a higher-quality slice of the small-cap universe because it requires its constituents to be profitable. 30% of Russell 2000 constituents lose money. That makes IJR a better choice if we hit a recession and/or rates keep climbing. Money-losing companies rely heavily on debt to stay afloat, leaving them vulnerable as the economy cools or the cost of capital rises.
Already have an account?