Stock picking can be the key to investing in small-cap stocks.
Rob Harvey, the man behind the scenes Dimension US Small Cap ETFusing an active management approach to buying the group. He tries to avoid small-cap stocks that underperform and drag down the index.
“There’s no reason to own companies whose profitability is really in trouble,” the firm’s co-head of product experts told CNBC’s “ETF Edge” this week. “You take those out of your small-cap universe, (and) you can Do a lot of things to improve your returns.”
this Russell 2000Companies tracking small-cap stocks are up more than 12% year to date. At the same time, a wider S&P 500 Index It rose about 23% over the same period.
As of Thursday, the fund’s top holdings were Bean Sprouts Farmers Market, Abercrombie & Fitch, factoryaccording to the Dimension Fund Advisors website. However, its largest holding is cash and cash equivalents, accounting for 1.13% of the fund.
Ben Slavin, global head of ETFs at BNY Mellon, noted that investors are looking for more actively managed products to screen out laggard small-cap stocks.
“Investor sentiment has shifted toward small-cap stocks, and you can see that in the numbers from a fund flow perspective, in terms of where investors are putting their money,” Slavin said. “These types of The strategy is benefiting.”
As of Friday’s close, the Dimension US Small Cap ETF was underperforming the Russell 2000 by more than 1% this year.
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