Global ETFs For The January Effect

For one trading day at least it looks as if the January Effect, the scenario under which small-caps lead an early-year market rally, is working.

With a Wednesday gain of almost three percent on volume that was well above double the daily average, the iShares Russell 2000 Index (NYSEARCA:IWM) surged to a new-all time high.

iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB)
A 571.2% return. That’s what you could have in your portfolio if you’d been reading Stocks Under $10 . So what is this incredible stock? And more importantly — what’s the next under-$10 stock ready to skyrocket? Find out now with your FREE trial to Stocks Under $10 from TheStreet.

That should give fans of the January Effect something to brag about. When including Wednesday’s gain, the $15.9 billion ETF has jumped almost six percent in the past month.

So it looks like U.S. small-caps are off to a fine start in 2013. If that becomes a prevailing trend, investors may want to add some international small-cap exposure to their portfolios as well. As has been noted, some of the small-cap ETFs tracking BRIC nations outperformed their large-cap counterparts in 2012.

If risk appetite is truly being renewed, select international small-cap funds should offer valid complements or alternatives to U.S.-focused equivalents. Here are some sound ideas.

WisdomTree Europe SmallCap Div Fd (NYSEARCA:DFE) Coming off a year in which it surged almost 22 percent, the WisdomTree Europe SmallCap Dividend Fund could be in for another big year as late-comers embrace compelling valuations for European equities. The Stoxx 600 Index ended 2012 trading at just 11.4 times 2013′s estimated earnings, according to Bloomberg.

Adding to the good news is another Bloomberg report that notes the Euro Stoxx 50 Index may rally as much as eight percent this month.

DFE allocates over 35 percent of its combined weight to discretionary and financial services names, putting the ETF in position to soar in a risk on environment. Noteworthy is the fact that London’s FTSE 100 surged above 6,000 today and DFE features a weight of 24.4 percent to the U.K. Investors are also compensated for taking on the risk of European small-caps by DFE, which features a 30-day SEC yield of four percent.

Market Vectors ETF Trust (NYSEARCA:GERJ) GERJ will turn two years old in April, but an assets under management total of just $4.5 million indicates investors have not yet warmed to this ETF. That is a shame because GERJ soared almost 26 percent last year, outperforming the larger iShares MSCI Germany Index Fund (NYSEARCA:EWG) along the way.

After a strong 2012 for German equities, some analysts are taking a more cautious approach to the Eurozone’s largest economy this year.

However, if German stocks come even remotely close to delivering an encore in 2013, GERJ may prove to be the better bet once again. On a valuation basis at least, GERJ looks more attractive here. The fund has a P/E ratio of 11.24 and a price-to-book ratio of 1.43, according to Market Vectors data. That compares with EWG’s P/E of 18.23 and a price-to-book ratio of 2.19.

WisdomTree Emerging Mkts Small Cp Div Fd (NYSEARCA:DGS) For those that do not want to make a country-specific bet on emerging markets small-caps, the WisdomTree Emerging Markets SmallCap Dividend Fund offers perhaps the best alternative for eschewing single country risk while still capturing small-cap exposure in the developing world.

At the top, the fund is somewhat conservative with Taiwan and South Korea combining for about 33.6 percent of the fund’s weight. The subsequent country weights are also of importance to investors. With Thailand, Malaysia and Turkey combing for almost 26 percent of the ETF’s weight, DGS stands as arguably the best avenue for getting small-cap exposure in those nations.

Additionally, DGS is another attractively valued ETF. At the end of the third quarter, DGS had a P/E ratio of about 13 and a price-to-book ratio of just over one, according to WisdomTree data. Even if those numbers have come up since the end of that quarter, they probably have not risen dramatically enough to touch IWM’s P/E of 25.22 and its price-to-book ratio of 3.1.

This article was originally written by The ETF Professor, and posted on Benzinga.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!