Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

This Worst-Performing Small-Cap ETF Is Now Looking Good

By

The Market Vectors Russia Small-Cap ETF, the worst performer among the the four major BRIC small-cap funds last year, has shown signs of life in 2013.

PrintPRINT
Editor's Note: This content was originally published on Benzinga.com by The ETF Professor, Benzinga Staff Writer.

Some small-cap ETFs, particularly emerging markets funds, have shown noticeable signs of weakness in recent days. That is not the case for all small-cap ETFs and an arguably surprising candidate is showing signs of leadership.

The Market Vectors Russia Small-Cap ETF (NYSEARCA:RSXJ), the worst performer among the the four major BRIC small-cap funds last year, has shown signs of life in 2013.

Accounting for Thursday's gain of almost 1.3 percent, RSXJ is now up nearly three percent year-to-date, a performance that easily tops comparable BRIC small-cap ETFs such as the Market Vectors Brazil Small-Cap ETF (NYSE:BRF) and the Market Vectors India Small-Cap ETF (NYSEARCA:SCIF). RSXJ has also easily outpaced the Guggenheim China Small-Cap ETF (NYSEARCA:HAO) since the start of the year.

With just $10.2 million in assets under management and average daily volume below 15,100 shares, RSXJ is often overlooked in favor of large-cap funds in the Russia ETF conversation. ETFs have fed demand for Russian large-caps, leading to a widening valuation chasm between the countries large and small market value stocks, according to JPMorgan research.

That market value should not diminish the allure of RSXJ because Russian small-caps have their own virtues relative to their larger peers. Indeed, investing in a Russia ETF usually means significant exposure to the energy sector and that works when oil prices rise. However, RSXJ is more diverse than Russian large-cap ETFs.

RSXJ has an 18.1 percent allocation to the energy sector. That can be viewed as enough to give the ETF some correlation to rising oil prices, but not so much that the fund should suffer mightily if oil prices experience significant price retrenchment. On the other hand, the Market Vectors Russia ETF (NYSEARCA:RSX) devotes almost 43 percent of its weight to energy names, many of which are state-controlled.

That brings up another point in favor of RSXJ, which is that as a small-cap fund, it is not excessively weighted to state-run firms. For example, the ETF has just a 0.2 percent weight to utilities stocks, arguably Russia's most heavily relegated sector and that is not known for stable dividends or an ability to generate free cash, as JPMorgan noted.

In an effort to attract more foreign investment, is legitimately working to diversify its economy away from energy dependence to greater domestic consumption. Should those efforts bear fruit in the near-term, RSXJ could benefit due to its combined 18 percent weight to discretionary and staples names.

One reason may be performing well this year is that investors are buying according to Market Vectors data. The SPDR S&P Emerging Markets Small Cap ETF (NYSEARCA:EWX) has a P/E ratio of almost 13 and a price-to-book ratio of nearly 1.2.


Below, find some more great ETF and market content from Benzinga:

Amazon's Phone Is A "Low Risk Strategy" That Could Pay Off
Non-Farm Payrolls Drop In January, Unemployment Rate Rises

A Netflix/AMC Merger Would Be A Win For All

Twitter: @Benzinga


Benzinga Pro covers this and all market news in real time. Get your free trial here.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE