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- The message of small-caps relative to large-caps is less about risk sentiment, and more about growth perceptions.
- Small-caps relative to large-caps have undergone a stunning collapse.
- Large-caps are more likely to suffer relative to small-caps purely because of US Dollar strength.
- Small-caps relative to large-caps have undergone an unbelievable relative collapse with severe weakness in those companies relative to larger multi-nationals.
- Clearly momentum is quite negative on the downside, and likely justified given the current deflation pulse permeating in market movement.
- At some point, small-caps will be oversold and likely will then switch from market laggard to market leader.
Europe Woes, Small Cap Decline, Corporate Buyback Excess Fuels Deep Risk For Equities
- The euro has been facing a "plate glass" scenario - and the glass is now shattering. The euro is now likely to break below par ($1.00 US).
- Tuesday's support break in small caps could be a very, very big deal.
- Corporate buybacks have helped to fuel the rally, with S&P 500 companies spending 95% of profits on buybacks and payouts.
- The buy and hold era is over. Stormclouds and thunder and lightning are rolling in.
Why The iShares Russell 2000 ETF Will Underperform
- I noted an anomaly Thursday morning, when the small-cap segment ETF, the IWM, diverged sharply from the tracks of the SPY, DIA and QQQ, and I know why.
- As investor interest and concern intensifies about the prospect of rising interest rates and Fed rate action, threat is born to the smallest of companies greatly dependent on capital.
- Recent economic data strength intensified the rate focus, and drove capital out of the small-cap heavy IWM. It's a trend that has run all year, and I expect to continue.
If The Economy Is Improving, Why Are Investors Pricing In A Slowdown?
- The Bureau of Economic Analysis (BEA) surprised even the most optimistic of economists when it reported the U.S. economy grew at an annual rate of four percent in the second.
- As the U.S. economy improved, the yields on the 10-year U.S. Treasury started to rise as interest rates rose with general optimism towards the economy.
- BEA say the U.S. economy grew by 0.1% in the first quarter, then after a couple of revisions, they said the economy actually contracted 2.9% in the first quarter.
- Treasuries remain relatively well bid, acting as if either the US economy is about to meaningfully slow down.
- U.S. small-cap stocks are considerably more vulnerable than emerging markets despite lingering fears there.
- Sector movement also does not validate small-cap strength in the near-term.
Calvert Chief Investment Officer Natalie Trunow: Risk Premium Up, Increased Volatility Next 6-9 Months
- Stocks: added risk premium, increased volatility in next 6 – 9 months.
- Small cap stocks should outperform large caps.
- Bad retail news at end if better housing news, which will come as foreclosures continue to shrink.
- David Tepper just punched the stock market in the face.
- The new market narrative is "coordinated complacency" and "deflation."
- Russell 2000 small caps are in trouble.
- Apple's low P/E and the inverse algorithm trade could help it to outperform.
Bearish On The Market? Russell 2000 Better Short Than S&P 500
- Our outlook remains bearish on the US market.
- Overvaluation of Russell is more extreme than S&P 500.
- Composition of Russell 2000 companies are more sensitive to business cycle than S&P.
There are no Transcripts on IWM.
Fri, Oct. 31, 4:17 PM
Fri, Oct. 17, 4:20 PM
Wed, Oct. 15, 3:08 PM
- Way out in front on the way down, might the Russell 2000 (IWM -0.4%) lead the path back up? An afternoon move higher has the small-cap index down just 0.25% after being off nearly 2%.
- The Dow (NYSEARCA:DIA) has moved 170 points off of its low, now down 1.6%, and the Nasdaq 100 (NASDAQ:QQQ) - lower by nearly 3% at one point - is off just 1.25%.
- Small-cap ETFs: IWM, TZA, TNA, IWC, UWM, VB, IJR, SLY, RWJ, URTY, SCHA, TWM, RWM, SRTY, SAA, DWAS, VTWO, VIOO, SDD, PZI, SBB, FDM, RSCO, JKJ, WMCR, FYX, EWRS, XSLV, TWOK, SMLV, PXSC, CSF
Tue, Oct. 14, 3:31 PM
- Global growth, foreign-exchange, oil, and small caps are the subject of every client inquiry, says David Kostin. His team's recommendation: Buy "American exceptionalism."
- In Kostin's view, U.S. economy and corporate fundamentals are still strong, with economic growth expected by Goldman economists to be 3.2% next year, the fastest expansion since 2005. Europe is expected to grow just 1%.
- What his team likes are those stocks of companies which have a high proportion of domestic sales, plus sectors like Consumer Staples (XLP -0.1%) and Discretionary (XLY +0.7%) which stand to benefit from lower oil prices (plunging again today).
- As for small caps (IWM +0.9%), Kostin is wary, noting downward earnings revisions have boosted small cap P/E ratios even as prices have declined.
- The list of S&P 500 names capturing two or more of Kostin's themes: GT, GM, PCLN, AMZN, CMCSA, LOW, DG, TSN, ADM, CVS, AVP, WAG, PXD, HAL, JPM, BAC, SCHW, PNC, MS, C, GNW, LNC, MET, THC, AET, UNH, ESRX, HUM, WLP, BIIB, GILD, DAL, CMI, FLR, CRM, JBL, MA, FB, MU, FSLR, VMC, MON, T.
Mon, Oct. 13, 1:33 PM
- Electronic Cigarettes International Group, Ltd. (OTCQB:ECIG) is set for its IPO of 33.3M shares of common stock at a prospective price of $4.50 per share. The firm is selling 28,443,133 shares and selling shareholders are offering 4,890,200.
- The company markets and distributes electronic cigarettes and accessories through over 50K outlets in multiple countries.
- Proforma 2013 financials: Revenues: $113.2M; Gross Profit: $55.5M; Operating Expenses: $48.9M; Operating Income: $6.5M; Net Loss: ($11.4M); Loss Per Share: ($0.11).
- Proforma 1H 2014 financials: Revenues: $48.5M; Gross Profit: $26.8M; Operating Expenses: $57.9M; Operating Loss: ($31.1M); Net Loss: ($10.5M); Loss Per Share: (0.08).
- Actual 1H 2014 financials: Revenues: $15.4M (+862.5%); Gross Profit: $8.2M (+780.1%); Operating Expenses: $92.8M (-999%); Operating Loss: ($84.6M); Net Loss: ($84.5M); Loss Per Share: ($1.23); Quick Assets: $5.6M (+166.7%); Cash Burn Ops: ($10.9M) (-999%).
- The company expects Q3 2014 revenues to be $16M - 17M (pro forma net $22.9M - 24.3M).
- ETFs: IWM, TZA, TNA, IWC, UWM, VB, IJR, SLY, RWJ, VBK, URTY, SCHA, TWM, IWO, RWM, IJT, SRTY, SAA, DWAS, VTWO, SLYG, VIOO, SDD, RZG, PZI, SBB, RSCO, FDM, JKJ, UKK, VTWG, VIOG, WMCR, FYX, EWRS, XSLV, TWOK, SKK, JKK, SMLV, PXSG, FYC, PXSC, CSF
- ETFs: IRY, IXJ (IPO -0.5%)
Sun, Oct. 12, 7:57 PM
- There's no bounce yet from last week's steep decline as S&P 500, Nasdaq 100 and DJIA futures are all lower by 0.5% and the Russell 2000 by 0.9%.
- Money continues to flow into fixed income, with the 10-year Treasury yield down three basis points to 2.28%, and gold is higher by $10 per ounce to $1,232.
- Speaking at the IMF's annual meeting over the weekend, new Federal Reserve Vice Chairman Stanley Fischer warned of "further bouts of volatility" as markets come to grips with the idea of the Fed's first rate hike since 2006, but he doesn't expect tighter monetary policy in the States to damage the international economy.
- ETFs: SPY, QQQ, SH, DIA, IWM, TZA, TNA, SSO, SDS, VOO, PSQ, IVV, SPXU, UPRO, UWM, TQQQ, SPXL, RSP, QID, SQQQ, DOG, QLD, DXD, RWL, EPS, URTY, UDOW, TWM, SDOW, DDM, RWM, SRTY, BXUB, VTWO, QQEW, QQQE, SPLX, SFLA, BXUC, QQXT, EWRS, TWOK, SPUU
Fri, Oct. 10, 7:16 AM
- S&P 500 (NYSEARCA:SPY) and DJIA (NYSEARCA:DIA) futures are lower by 0.5%, Nasdaq 100 (NASDAQ:QQQ) by 0.9%, and Russell 2000 (NYSEARCA:IWM) by 0.8%, as yesterday's tumble rolls worldwide.
- Europe's Stoxx 50 (NYSEARCA:FEZ) is down 1.6%, led by a 2% plunge in Germany (NYSEARCA:EWG), and the Hang Seng's (NYSEARCA:EWH) 1.9% fall was the largest in Asia overnight.
- The 10-year Treasury yield is off one basis point at 2.30% and gold is up $17 per ounce to $1,223.
- ETFs: SPY, QQQ, SH, DIA, SSO, SDS, VOO, PSQ, IVV, SPXU, UPRO, TQQQ, SPXL, RSP, QID, SPXS, SQQQ, DOG, QLD, DXD, RWL, EPS, UDOW, SDOW, DDM, IWB, BXUB, QQEW, QQQE, VONE, SPLX, SFLA, BXUC, QQXT, ROLA, ONEK, SPUU, EWRI
Thu, Oct. 9, 4:13 PM
- Today's 2.6% decline in the Russell 2000 (NYSEARCA:IWM) stands against 2% drops in the S&P 500 and Nasdaq; the small-cap index is now off 8.1% YTD, and lagging the S&P 500 by 1,230 basis points.
- The Russell has now also moved into negative territory on a year-over-year basis.
- ETFs: IWM, TZA, TNA, UWM, URTY, TWM, IWN, IWO, RWM, SRTY, VTWO, UKK, VTWG, EWRS, TWOK, VTWV, SKK, UVT, SJH
Wed, Oct. 1, 3:52 PM
- Today's decline in the Russell 2000 (IWM -1.4%) puts it more than 10% below the level hit in March (and in July). The index fell 6% in September alone.
- For the year, the Russell is lower by 6.6% after gaining nearly 40% in 2013.
- As rough as it's been, it's the divergence with large caps which looks like the bigger story - while the small caps have fallen 10% during their correction, the S&P 500 is flat, and only in the last two weeks beginning to move in lockstep with the Russell.
- For the year, the S&P 500 is up 5.4%, about 1,200 basis points ahead of the Russell, and on a year-over-year basis, the S&P's 15% gain is 1,500 basis points faster than the Russell.
- ETFs: IWM, TZA, TNA, UWM, VB, VBR, EES, VBK, URTY, SCHA, TWM, IWN, IWO, RWM, SRTY, VTWO, JKL, JKJ, TILT, UKK, VTWG, FYX, FYT, EWRS, TWOK, SKK, VTWV, JKK, UVT, SJH, IESM, VLU, FYC
Mon, Sep. 22, 2:55 PM
- As income favorites, business development companies often catch a bid during broader market selloffs (and bond market rallies), but the small caps (IWM -1.3%) are bearing the brunt of today's selling and the BDCs tend to fall into the that sector (though excluded from Russell indices).
- Fifth Street Finance (FSC -1.1%) has a market cap of $1.3B; Main Street Capital (MAIN -2.6%) - market cap of $1.4B; Apollo Investment (AINV -2%) - $2B; Triangle Capital (TCAP -1.3%) - $730M; Ares Capital (ARCC -0.4%) - $5.1B. Hanging in there better than the rest is Prospect Capital (PSEC -0.1%), with a $3.45B market cap.
- ETFs: BDCL, BDCS, BIZD
Fri, Sep. 19, 2:41 PM
- There's not a lot of action in the large cap averages this session, but the Russell 2000 (IWM -1.1%) continues to shed ground both absolutely and relative to the S&P 500, and has now turned negative for the year - it's lower by 1.1% YTD, ceding about 1000 basis points to the S&P,
- Maybe bearish, but probably bullish for those with a contrarian streak, technicians are starting to warn about the dreaded "Death Cross" - the 50-day moving average moving below the 200-day moving average. Ryan Detrick points out 19 instances since 1988 where the Russell 2000 has completed a Death Cross - it's tended to be bearish in the very short-term, but bullish over longer periods.
- ETFs: IWM, TZA, TNA, IWC, UWM, VB, IJR, SLY, RWJ, URTY, SCHA, TWM, RWM, SRTY, SAA, DWAS, VTWO, VIOO, SDD, SBB, PZI, FDM, JKJ, RSCO, WMCR, XSLV, FYX, EWRS, TWOK, SMLV, PXSC, CSF
Tue, Sep. 9, 3:11 PM
Fri, Aug. 22, 5:58 AM
- London Stock Exchange (OTCPK:LDNXF) has announced that it is looking to raise £938M ($1.6B) to part fund the acquisition of stock index unit Frank Russell.
- LSE will offer 74,347,813 new shares at a price of 1,295 pence, a 30.1% percent discount to yesterday's closing price.
- The deal would give London Stock Exchange third place in the booming ETF market, behind market leaders S&P Dow Jones and MSCI.
- Russell ETFs: IWM, TZA, TNA, UWM, SPXS, IWF, SKF, URTY, IWD, TWM, IWO, IWN, RWM, SRTY, IWV, IWB, VTWO, VONE, IWW, IWZ, VTWG, UKK, ROLA, RTLA, FBG, THRK, UKF, SKK, EWRS, ONEK, TWOK, VTHR, VONG, VTWV, SMLV, UVT, VONV, UVG, EWRI, SJH, UWC, LGLV, TWQ, SJF, FIBG
Mon, Aug. 11, 3:15 PM
- Many highly regarded small-cap funds have put up "no vacancy" signs to new investors, writes Sarah Max in Barron's, their managers cautious among perky valuations or unwieldy AUM, or both. Notable closures include the $1.6B Artisan Small Cap Investor Fund, the $6.2B Fidelity Small Cap Discovery Fund, and the $993M Hotchkis & Wiley Small Cap Value Fund. T. Rowe Price has also closed two of its top performers, the $10.4B T. Rowe Price Small-Cap Fund and the $16B T. Rowe Price New Horizons Fund.
- Caution may be in order given the big run for small-caps, but fund manager Bill Grierson says the current Russell 2000 (IWM +1.1%) P/E ratio is just slightly higher than its 10-year average of about 17x. Further, Q2 sales growth is at about 9% so far.
- Another manager allows it's not an easy time to find cheap stocks, but beyond the sexy segments there's a whole universe of small companies, and he's been picking up some names.
- ETFs: IJS, VBR, EES, IWN, JKL, RZV, SLYV, TILT, VIOV, FNDA, FYT, VTWV, PXSV, UVT, SJH, IESM, VLU
Tue, Aug. 5, 12:45 PM
- Cautious overall on small caps (NYSEARCA:IWM) due to valuation concerns, Goldman's David Kostin nevertheless has a list of 25 names with market caps less than $4B which could offer at least 25% upside to his firm's price target over the next year.
- The list skews towards Consumer Discretionary - Lumber Lidquidators (LL +2.1%), Office Depot (ODP -2.4%), RetailMeNot (SALE -26.1%), Ryland (RYL +0.5%), Steven Madden (SHOO +2.7%), Vitamin Shoppe (VSI -8.2%) - and Tech - Universal Display (OLED -0.2%), Qlik Technologies (QLIK -1.6%), Proofpoint (PFPT -1.5%), Polycom (PLCM +0.2%), Nimble Storage (NMBL -0.3%), Marketo (MKTO +1.1%), Infinera (INFN +1.1%), Cornerstone Ondemand (CSOD -0.9%), GT Advanced Technology (GTAT +5.7%).
- Also included are Health Care names: Agios Pharmaceuticals (AGIO -1.1%), NPS Pharma (NPSP +0.7%), NuVasive (NUVA -1.8%), Synageva (GEVA -1.6%); Consumer Staples: Darling Ingredients (DAR -0.8%); Materials: Axiall (AXLL -1%), Boise Cascade (BCC -0.9%); Industrials: Granite Construction (GVA +0.7%), Financials: MGIC Investment (MTG +1.2%), Radian (RDN +1.7%).
Mon, Jul. 28, 12:48 PM
- The Direxion Daily Mid Cap Bull 2X Shares (Pending:MDLL) and Direxion Daily Small Cap Bull (Pending:SMLL) will offer investors leveraged exposure to their respective market caps.
- Both funds will have an expense ratio of 0.66%, making them relatively inexpensive compared to many leveraged equity ETFs.
- The Direxion 7-10 Year Treasury Bull 2X Shares (Pending:SYTL) will offer investors leveraged exposure to intermediate-term U.S. Treasury bonds, while charging an expense ratio of just 0.65%.
- Other Russell 2000 ETFs: IWM, TZA, TNA, UWM, URTY, TWM, RWM, SRTY, VTWO, EWRS, TWOK
- Other S&P 400 ETFs: MDY, MVV, IJH, RWK, UMDD, IVOO, MZZ, SMDD, MYY
- Other Intermediate Treasury ETFs: IEF, PST, IEI, DTYS, TYO, UST, VGIT, TBX, GSY, SCHR, DTYL, ITE, TYD, TBZ, DFVL, FIVZ, DFVS, TYNS
IWM vs. ETF Alternatives
The iShares Russell 2000 Index Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the small capitalization sector of the U.S. equity market as represented by the Russell 2000 Index. The index represents the approximately 2,000 smallest companies in the Russell 3000 Index.
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