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IJS: Small-Cap Value Likely To Outperform Large-Cap Growth


  • For the last three years, the large-cap growth stocks have produced outsized returns. That has changed starting with the fourth quarter of 2020. Since then, small-cap value leads.
  • iShares S&P Small-Cap 600 Value ETF has outperformed its competitors ever since its launch on 7/24/2000.
  • We believe that the current economic and market conditions are favorable for investing in IJS.

Size and Valuation Factors

Market preferences have changed steadily since September 2020. Small-cap has gained more than large-cap, and value stocks have appreciated more than growth stocks. We illustrate these facts in two graphs from stockcharts.com.

The first graph shows the total return of large-, mid- and small-cap ETFs (SPY, MDY, IWM). Clearly, during the first half of the year the returns were not significantly different, while for the last six months the returns of small-cap, IWM, were substantially higher.

The second graph shows the total return of small-cap value, small-cap blend, and small-cap growth ETFs (IJS, IJR, IJT). We see that the return of value stocks, IJS, was substantially higher than that of growth stocks, IJT, or blend stocks, IJR.

To get a better understanding of the dynamics of changes in market preferences, we looked at the evolution of total returns of small value and large growth stocks.

Since September 2020 the small value stocks returned 65%, easily beating the large growth group, which returned only 15%. A detailed comparison of total returns of a small value ETF, IJS, and a large growth ETF, IWF, is shown in the table below.

7/2000 - 9/2007

10/2007 - 2/2009

3/2009 - 12/2016

1/2017 - 9/2020

10/2020 - 3/2021

IJS Small Value






IWF Large Growth






IJS - iShares S&P Small-Cap 600 Value ETF

The fund invests in small-capitalization stocks with relatively lower valuations.

As of 24 March 2021, IJS has net assets of 11.97B and 2.19% yield. The YTD total return is 16.50%, with a low expense ratio of 0.15%.

We compare some important statistics of IJS with a set of comparable small value ETFs.






Expense Ratio






This article was written by

Toma Hentea profile picture

Toma Hentea, PhD. is a University Professor Emeritus with extensive research experience in developing quantitative system models with application to financial markets. His market exposure is varied in accordance to the state of leading US and global economic indicators. Options and leverage are used to enhance the performance of his investments.

Toma leads the investing group Adaptive Momentum Investing, where he applies computational algorithms to evaluate the market state (risk on/off). He uses adaptive momentum strategies to construct robust stock and ETF quant portfolios, aiming at achieving double digit annual returns. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (25)


Many thanks for sharing. Allow me a question re the lookback period for risk-on / off: In an earlier article you mentioned a 75 days lookback period but now you mention 65 days. Which is the better one / why did you change from 75 to 65 days.
mont1750 profile picture
Thank you for this article. Being risk averse I have used TSLO's based on a multiple of the standard deviation of a holding with the goal of preserving capital. Do you believe using stop-loss orders would have benefits used with this portfolio since it uses a quarterly timing period?
2021 YTD returns as of 4/1 (source - Yahoo Finance)
Small Cap ETFs -

IWO. - 5.69% - Growth
IWM - 13.26% - Russell 2000 Idx
IWN - 21.50% - Value
IJS. - 24.10% - Value

I don’t know if value especially in small cap will continue to outperform growth...if history is any indicator, growth always triumphs in small caps. For now, holding just the IWM.
Retired Investor profile picture
@Sleepless@FED I thought so too until I ran the numbers. While true since 2009, Value has done better since 1972 (shown here). www.portfoliovisualizer.com/...
@Retired Investor
Why not use both and let momentum decide which one to pick?


Retired Investor profile picture
@drftr I looked at your link and would think someone would use IWM, not IWN as the benchmark to compare against. When you make that switch, an investor was better off owning IWM and saving the trading hassles. www.portfoliovisualizer.com/...
You missed a momentum comparison - XSVM. Outperforms all comparible small value ETFs.
Market Trends Investor profile picture
In a rising rate environment, those small banks and thrifts do great. They power the small cap value space with much of the heavy lifting.
Anyone have a take on a good way to monitor Toma's risk on risk off test? Can I just use total return say from Morningstar website or is there a way to use Portfolio Visualizer? It seems like comparison charting them on MS might be a good way....
@mtkelly1 So it is really just total return over 65 business days?? And one doesn't have to mess with relative strength readings....
Retired Investor profile picture
Thanks. I’m weighted to SCV in my US equity allocation. Thought your readers might like my article on Growth vs Value as it complements your work nicely. seekingalpha.com/...
@Retired Investor Did you mean SCHV? I like FNDX AVUV and VLUE.....
Retired Investor profile picture
@TJinFL No, SCV was shorthand for the asset class being discussed: Small Cap Value. I recently covered AVUV: seekingalpha.com/...

I like it too.
I find your analysis thoughtful and transparent. Very compelling. Thank you for sharing.
DorneanuJohn profile picture
I like this article very much, it show your search and view that I can follow in the second quarter. Thank you Toma
I would guess mid-caps have the best risk-adjusted returns of all cap-weighted ETFs but these results are nothing to sneeze at!

Tnx Toma...

Interesting ETF choices for your timing calls. I appreciate your sharing the past data as well.
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