iShares Morningstar Small-Cap ETF (ISCB)

iShares Morningstar Small-Cap ETF (IWM)

Profile

The iShares Morningstar Small-Cap ETF (IWM) seeks to track the Morningstar US Small Cap Index, which is comprised of the smallest 1,200 stocks in the US market. It invests at least 90% of its assets in common stocks that make up the index, with the remaining 10% allocated to other investments such as derivatives. IWM focuses on the small-cap segment of the US market, which is known for its higher growth potential and increased volatility compared to larger companies.

Objective

The primary investment goal of IWM is to provide long-term capital appreciation by tracking the performance of the Morningstar US Small Cap Index. It aims to achieve this by investing in a diversified portfolio of small-cap stocks across various industries.

Issuer

BlackRock

• Reputation and Reliability: BlackRock is the world's largest asset manager, with over $10 trillion in assets under management. It has a strong reputation for investment expertise and reliability, consistently ranking among the top ETF issuers.

• Management: BlackRock employs a team of experienced portfolio managers and analysts who oversee the management of IWM. The team has a deep understanding of the small-cap market and uses a quantitative approach to select stocks for the ETF.

Market Share

IWM is the largest small-cap ETF in the market, with over $70 billion in assets under management. It holds approximately 30% of the total market share for small-cap ETFs.

Total Net Assets

As of October 27, 2023, IWM has $71.34 billion in total net assets.

Moat

• Scale and diversification: IWM's large size and diversified portfolio provide several advantages, including lower trading costs, improved liquidity, and reduced single-stock risk.

• Experienced management: BlackRock's extensive experience and expertise in managing small-cap investments contribute to IWM's strong track record.

• Low expense ratio: IWM's expense ratio of 0.15% is significantly lower than the average expense ratio for small-cap ETFs, making it a cost-effective option for investors.

Financial Performance

• Historical performance: IWM has delivered strong historical returns, outperforming the broader market over the long term. Since its inception in 2000, IWM has generated an average annual return of 11.54%.

• Benchmark comparison: IWM has consistently outperformed its benchmark index, the Morningstar US Small Cap Index. Over the past 10 years, IWM has returned 14.5% per year, while the index has returned 13.4% per year.

Growth Trajectory

The small-cap market is expected to continue growing in the coming years, driven by factors such as technological innovation, globalization, and increasing economic activity. IWM is well-positioned to benefit from this growth, considering its size, diversification, and low expense ratio.

Liquidity

• Average Trading Volume: IWM has a high average trading volume, exceeding 20 million shares per day. This ensures easy buying and selling of the ETF with minimal impact on its price.

• Bid-Ask Spread: IWM has a tight bid-ask spread, typically around 0.01%, indicating low transaction costs associated with trading the ETF.

Market Dynamics

• Economic indicators: Strong economic growth and low-interest rates tend to favor small-cap stocks, leading to increased demand for IWM.

• Sector growth prospects: Sectors with high growth potential, such as technology and healthcare, are heavily represented in IWM, making it sensitive to their performance.

• Market volatility: Small-cap stocks are generally more volatile than large-cap stocks, impacting IWM's price fluctuations.

Competitors

• Vanguard Small-Cap Value ETF (VBR): 16.5% market share
• iShares Russell 2000 ETF (IWM): 15.8% market share
• Schwab Small-Cap ETF (SCHA): 10.4% market share

Expense Ratio

IWM has an expense ratio of 0.15%, which is significantly lower than the average expense ratio for small-cap ETFs.

Investment Approach and Strategy

• Strategy: IWM tracks the Morningstar US Small Cap Index, passively investing in the stocks included in the index.

• Composition: The ETF holds a diversified portfolio of approximately 1,200 small-cap stocks across various industries.

Key Points

• Large and diversified small-cap ETF
• Strong historical performance and benchmark outperformance
• Expected to benefit from small-cap market growth
• High liquidity and low expense ratio
• Sensitive to economic growth and sector performance

Risks

• Volatility: Small-cap stocks are inherently more volatile than large-cap stocks, leading to potential fluctuations in IWM's value.

• Market risk: IWM's performance is tied to the overall performance of the small-cap market, which can be impacted by various economic and market factors.

Who Should Consider Investing

• Investors seeking long-term capital appreciation through exposure to the small-cap market
• Investors comfortable with higher volatility
• Investors with a long-term investment horizon

Fundamental Rating Based on AI

8.5/10

IWM receives a strong rating based on its size, diversification, historical performance, and growth potential. Its low expense ratio and experienced management team further contribute to its attractiveness. However, investors should be aware of the inherent volatility associated with small-cap investments.

Resources and Disclaimers

• iShares Morningstar Small-Cap ETF website: https://www.ishares.com/us/products/239706/ishares-morningstar-small-cap-etf
• Morningstar: https://www.morningstar.com/etfs/arcx/iwm/quote
• ETF.com: https://www.etf.com/IWM

Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.