Small- and midcap stocks have picked up some notable interest of late. But what kind of strategy can get the best out of small-cap stocks? A quality small-cap ETF that finds strong names in a tougher, smaller environment could stand out.
In this case, the ALPS O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM), could appeal, with three firms presenting strong examples of the stocks one can expect to find therein.
See more: Quality Small Cap ETF OUSM Surpasses $600 Million AUM
OUSM tracks the O’Shares U.S. Small-Cap Quality Dividend Index for a 48 basis point fee. It looks for small-caps weighted for quality as well as high dividend yield and dividend quality. In doing so, it has returned 22.7% over the last one-year period, per SS&C ALPS Advisors. So, what kind of stocks does OUSM hold right now?
TXRH, and its famous Cactus Blossom, takes a 2.1% weight in the quality small-cap ETF. The stock has a solid 28.4 forward P/E ratio with 32% quarterly year-over-year (YoY) diluted earnings-per-share (EPS) growth, according to YCharts. The stock has returned 242.9% over five years, significantly outperforming the S&P 500 Total Return Index (SPXTR), which returned 109%.
New York Times Company Class A (NYT)
Intriguingly, the quality small-cap ETF also holds stock from the New York Times. While many media companies are struggling in the age of the internet, the firm’s diversified revenue sources and legacy status have helped it push on. It too offers a solid forward P/E ratio — of 28.7 — with a significant quarterly YoY diluted EPS growth of 84.6%, per YCharts.
The fixed income trading platform Tradeweb Markets, Inc. has outperformed SPXTR over the last five years. It has returned 150% compared to SPXTR’s 109% return in that time. It offers significant quarterly YoY diluted EPS growth of 40.5%.
Those stocks in the quality small-cap ETF represent a diverse grouping of firms that stand out in the smaller space. Small-cap stocks can offer some notable upside. But in a complicated space, a quality approach like OUSM’s can appeal.
VettaFi LLC (“VettaFi”) is the index provider for OUSM, for which it receives an index licensing fee. However, OUSM is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OUSM.
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