RWJ: Beating Other Small-Cap Value ETFs For 4 Years

seekingalpha05-04

deepblue4you RWJ strategy Invesco S&P SmallCap 600 Revenue ETF (NYSEARCA:RWJ) started investing operations on 02/19/2008 and tracks the S&P SmallCap 600 Revenue-Weighted Index. It has 597 holdings, a ...

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It has 597 holdings, a ...</p>\n\n<a href=\"https://seekingalpha.com/article/4689183-rwj-beating-other-small-cap-value-etfs-for-4-years\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>RWJ: Beating Other Small-Cap Value ETFs For 4 Years</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nRWJ: Beating Other Small-Cap Value ETFs For 4 Years\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-04 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4689183-rwj-beating-other-small-cap-value-etfs-for-4-years><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>deepblue4you RWJ strategy Invesco S&P SmallCap 600 Revenue ETF (NYSEARCA:RWJ) started investing operations on 02/19/2008 and tracks the S&P SmallCap 600 Revenue-Weighted Index. It has 597 holdings, a ...</p>\n\n<a href=\"https://seekingalpha.com/article/4689183-rwj-beating-other-small-cap-value-etfs-for-4-years\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"FDN","symbol_name":"First Trust Dow Jones Internet I","start_time":0,"source_url":"https://seekingalpha.com/article/4689183-rwj-beating-other-small-cap-value-etfs-for-4-years","article_id":"2432148733","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2432148733","pubTimestamp":1714827600,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"deepblue4you RWJ strategy Invesco S&P SmallCap 600 Revenue ETF (NYSEARCA:RWJ) started investing operations on 02/19/2008 and tracks the S&P SmallCap 600 Revenue-Weighted Index. 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As described by S&P Dow Jones Indices, S&P 600 companies with positive revenue are selected in the index. Then it: “weights are determined by dividing the constituent’s revenue by the total revenue of the index. A constituent’s revenue equals the sum of the constituent’s trailing four-quarter revenues.” The index is rebalanced quarterly and constituent weights are capped at 5% on rebalancing. The fund’s turnover rate in the most recent fiscal year was 46%. This article will use as a benchmark the parent index S&P Small Cap 600, represented by iShares Core S&P Small-Cap ETF (IJR). RWJ portfolio The heaviest sector in the portfolio is consumer discretionary (23.7% of asset value), followed by industrials (17.1%) and financials (11.7%). Other sectors weigh no more than 9%. Compared to the parent index, RWJ overweights consumer discretionary, energy, consumer staples and communication. It underweights financials, technology, healthcare, real estate and utilities.   RWJ sector breakdown (Chart: author; data: Invesco, iShares) The top 10 holdings, listed in the next table with fundamental metrics, represent 15.9% of asset value. The top name weighs 3.7%, so the portfolio is well-diversified and risks related to individual companies are low to moderate.   Ticker Name Last EPS growth %TTM P/E TTM P/E fwd Yield   WKC World Kinect Corp. 3.70 -47.30 25.44 10.75 2.86   UNFI United Natural Foods, Inc. 1.89 -162.84 N/A N/A 0   GPI Group 1 Automotive, Inc. 1.63 -8.42 6.92 7.50 0.64   SATS EchoStar Corp. 1.62 -400.14 N/A N/A 0   SAH Sonic Automotive, Inc. 1.29 675.33 11.68 9.92 2.10   KSS Kohl's Corp. 1.23 747.57 8.63 10.35 8.11   ABG Asbury Automotive Group, Inc. 1.21 -35.65 7.60 6.90 0   ANDE The Andersons, Inc. 1.20 -22.63 19.02 18.89 1.36   LNC Lincoln National Corp. 1.16 138.23 3.68 4.26 6.68   DXC DXC Technology Co. 1.03 -164.91 N/A 6.25 0   Click to enlarge Fundamentals RWJ is cheaper than the parent index regarding valuation ratios, as reported in the next table. Growth rates are mixed: sales growth is slightly above the benchmark, whereas earnings growth and cash flow growth are inferior.    RWJ IJR   P/E TTM 13.11 15.22   Price/Book 1.33 1.67   Price/Sales 0.25 0.97   Price/Cash Flow 5.1 8.48   Earnings growth 17.63% 18.27%   Sales growth % 6.90% 5.57%   Cash flow growth % 5.65% 9.25%   Click to enlarge Data source: Fidelity. In my ETF reviews, risky stocks are companies with at least 2 red flags among the following: bad Piotroski score, negative ROA, unsustainable payout ratio, bad or dubious Altman Z-score, excluding financials and real estate where these metrics are unreliable. With this assumption, risky stocks weigh 27% of asset value, which is a bad point. According to my calculation of aggregate quality metrics (reported in the next table), portfolio quality is similar to the small-cap benchmark. For convenience, calculations have been performed on constituents weighing more than 0.1% of assets, representing an aggregate weight of 84%.    RWJ IJR   Altman Z-score 3.95 2.79   Piotroski F-score 5.36 5.39   ROA % TTM 3.20 3.52   Click to enlarge Performance Since 3/1/2008 RWJ has outperformed the S&P 600 by about 1.7% in annualized return, as reported in the next table. Volatility is higher, resulting in the same risk-adjusted performance (Sharpe ratio).    Total Return Annual.Return Drawdown Sharpe ratio Volatility   RWJ 463.14% 11.28% -55.97% 0.5 25.59%   IJR 341.57% 9.62% -54.24% 0.5 20.85%   Click to enlarge The fund is also ahead of its parent index over the last 3 years:   RWJ vs IJR, 3-year returns (Seeking Alpha) RWJ vs. competitors Morningstar and Fidelity classify RWJ in the “Small Value” category. Valuation metrics confirm this classification. The next table compares characteristics of RWJ and four popular small-cap value ETFs from different issuers following various methodologies:  SPDR S&P 600 Small Cap Value ETF (SLYV) iShares Russell 2000 Value ETF (IWN) Vanguard Small Cap Value ETF (VBR) Avantis U.S. Small Cap Value ETF (AVUV)     RWJ SLYV IWN VBR AVUV   Inception 2/19/2008 9/25/2000 7/24/2000 1/26/2004 9/24/2019   Expense Ratio 0.39% 0.15% 0.24% 0.07% 0.25%   AUM $1.45B $3.79B $11.80B $55.51B $10.92B   Avg Daily Volume $6.76M $17.95M $208.52M $106.26M $62.89M   Holdings 597 463 1418 859 767   Top 10 15.94% 8.20% 5.01% 5.67% 8.94%   Turnover 46.00% 46.00% 32.00% 16.00% 7.00%   Yield TTM 1.30% 2.28% 1.98% 2.11% 1.64%   Div. Growth 3 Yr CAGR 34.82% 21.43% 13.88% 13.71% 20.65%   Click to enlarge RWJ has the highest fee, the highest turnover (tie with SLYV), the lowest yield, yet the highest 3-year dividend growth rate. The next chart plots total returns, starting on 9/30/2019 to match all inception dates. RWJ is the best performer, beating the actively managed fund AVUV by 8.5% in total return, and far ahead of the passively managed funds.   RWJ vs competitors, since 9/30/2019 (Seeking Alpha) However, RWJ is second to last over the last 12 months:   RWJ vs competitors, trailing 12 months (Seeking Alpha) Why RWJ and AVUV outperform peers Most value indexes have two weaknesses. The first one is to classify all stocks on the same criteria. It means valuation ratios are considered comparable across sectors and industries. Obviously, they are not: my monthly dashboard here shows how valuation and quality metrics may vary across sectors. The second weakness is to rely too much on the price/book ratio (P/B). Historical data show that companies with a low P/B have, on average, a lower return, a higher volatility and deeper draw downs than companies with a low price/earnings, price/sales or price/free cash flow. RWJ ignores P/B, whereas AVUV has a more sophisticated approach than passive value ETFs. These methodological differences may explain why these two ETFs have outperformed their competitors over the last 4.5 years. Takeaway  Invesco S&P SmallCap 600 Revenue ETF weights S&P 600 stocks based on 12-month revenues. Its portfolio is currently focused on consumer discretionary, but it is well-diversified across holdings. RWJ is cheaper than the S&P 600 regarding valuation ratios, but growth and quality metrics are average. The fund has outperformed the small-cap benchmark since its inception in 2008, and its competitors over the last 4 years. However, it has lagged for 12 months.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2432148733"}