5 Best Performing Small-cap ETFs in 2023

3. Pacer US Small Cap Cash Cows 100 ETF (CALF)

Year-to-Date Returns: 18.3%

The Pacer US Small Cap Cash Cows 100 ETF (CALF) has a very simple and clear strategy when it comes to portfolio construction. It scans the companies in the S&P SmallCap 600 for those with the highest free cash flow yields and bundles the top 100 of those companies into this ETF. The ETF has $3.35 billion in assets and sports a 0.59% expense ratio.

Topping the list of those 100 companies in its portfolio is Patterson-UTI Energy, Inc. (NASDAQ:PTEN) with a weighting of 2.89%. The company, which provides equipment and services to clients operating in the oil and gas industry, has been cash flow positive for four straight quarters and delivered a positive free cash flow yield for the last two quarters. After posting a FCF yield of 3.5% in the first quarter, that figure jumped to 7.8% in Q2.

There was a 26% rise in hedge fund ownership of Patterson-UTI Energy, Inc. (NASDAQ:PTEN) during the second quarter, though the smart money nonetheless remains far less bullish on the company than they were prior to 2019. Ben Jacobs’ Anomaly Capital Management more than doubled its stake in PTEN during Q2, giving it 6.01 million shares.

Bernzott Capital Advisors US Small Cap Value believes Patterson-UTI Energy, Inc. (NASDAQ:PTEN) will benefit from favorable market conditions in the future, as relayed in its Q1 2023 investor letter:

“Patterson-UTI Energy, Inc. (NASDAQ:PTEN): PTEN is a leading supplier of contract land drilling and pressure pumping services primarily in the United States. Their portfolio of high-spec rigs should garner superior day rates driving robust return of capital in the form of dividends and share repurchases. The disciplined nature of capital deployment overall in the industry should keep market conditions very favorable for the foreseeable future.”