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Hot Stocks in Hong Kong Are Boosting ETFs Like ‘ENTR’

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Hong Kong-listed equities are on fire this year, aiding ETFs which investors might not readily expect. The ERShares Entrepreneurs ETF (ENTR) is one of them.

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

The ETF allocates more than 28% of its weight to ex-US stocks, according to Morningstar data.

“Among her favorites are Autonomous Aerial Vehicles (AAV) maker Ehang, and FinTech company FUTU. Both have exceeded 150% YTD performance with explosive growth that she believes will propel them higher,” according to ERShares, citing COO and Chief Investment Strategist Eva Ados.

ENTR 6 Month Performance

The Right Way to Blend Domestic and International Exposure

“Ados mentions the up to 50% discounted valuations that HK companies experience relative to mainland China and the US. She notes regulatory changes that now allow mainland Chinese investors to move directly into HK, which was not possible before,” according to ERShares.

As Ados also points out, there are some benefits that come with equities exposure in Hong Kong.

“With respect to the US, more investors are attracted to HK for not only the relatively attractive pricing but also the lower risk of being delisted on US exchanges,” notes ERShares. “The combination can sometimes produce exceptional run ups as the recent single-day 300% gain from Kuashou with last week’s IPO. She adds that currency gains only add icing to the cake. She remains bullish for International and Small Cap equities, especially those with a high growth entrepreneurial orientation.”

Small Caps Still Beckon. And They Don’t Have to Be Risky

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Small cap stocks are still worth considering, and investors don’t need to take on added risk with quality approaches like the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Small stocks have been hot for a while. They’re not flaming out anytime soon.

“However, despite short covering in the Russell 2000 Index over the past few reporting periods, I continue to see the small caps as heavily shorted, and thus the biggest area of opportunity if equities continue to advance,” writes Schaeffer’s Investment Research Vice President of Research Todd Salmone.

ERSX: A Prime Choice for Small Cap Exposure

ERSX tracks a fundamental-selected index of global small cap ex-US equities weighted by market capitalization. The fund’s index is benchmarked against the FTSE All-World Ex-US Small Cap Index, a market-capitalization weighted index representing small cap stocks’ performance in developed and emerging markets excluding the United States. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

ERSX 1 Year Performance

“Continuing with the small cap versus large cap theme, I was amazed when our own Quantitative Senior Analyst Chris Prybal put the chart below, together last week. It is the 10-day, equity-only put/call volume ratio on only components of the Russell 2000 Index,” adds Schaeffer’s.

Smaller companies are more levered to economic rebounds, enhancing the potential of ERSX this year. The ERShares ETF is also alluring because ex-US small caps are more attractively valued than domestic equivalents.

Up 60%, the Small Cap ERSX ETF Is Not Fazed by Last Week

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Small cap stocks lagged the broader market last week, but that doesn’t dent the case for exchange traded funds such as the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

Some market observers believe last week’s small cap lethargy could give way to upside opportunity.

“After a fierce run, smaller-capitalization stocks were hit by profit-taking this week, amidst a spike in Treasury yields. But gains still lie ahead for small caps, which are supported by strong earnings growth and reasonable valuations, analysts say,” reports Jacob Sonenshine for Barron’s.

A Good Time to Consider ERSX?

As investors look for ways to position their portfolios for the months ahead, small cap stock ETFs can help jumpstart a new market cycle.

Small cap companies typically show an advantage over large- and mid-cap stocks during the initial stages of an economic expansion phase. Small cap stock performances are more correlated with U.S. GDP, so their financial performance may be more aligned with the initial U.S. economic expansion period. There are other reasons to consider ERSX.

“The higher rate of return on the risk-free bond makes owning stocks less attractive. Another problem: While typically, higher yields are positive harbingers of growth for smaller companies, which are more economically sensitive than larger ones, that’s when yields are rising gradually,” according to Barron’s.

Increased fiscal spending could also support a shift toward cyclical companies, which are more tied to the broader economic recovery. These smaller companies, banks, manufacturers, and commodity producers typically do better as the economy exits a recession.

ERSX tracks a fundamental-selected index of global small cap ex-US equities weighted by market capitalization. The fund’s index is benchmarked against the FTSE All-World Ex-US Small Cap Index, a market-capitalization weighted index representing small cap stocks’ performance in developed and emerging markets excluding the United States. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

ERSX 1 Year Total Return

The Gains Are Abroad. And Not Where You Might Think

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Data confirm investors are pouring cash into international equity funds, a scenario that bodes well for the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

The unique factor strategy offered by ERSX is ideally suited for investors looking to capitalize on both growth and value opportunities found with ex-U.S. smaller stocks.

“International exchange-traded funds are back in favor,” reports Ari Weinberg for the Wall Street Journal. “The turnaround has been building for months. Following the summer 2020 rally for U.S. stocks, interest in international developed- and emerging-markets stocks picked up in November and December and has surged through February. According to FactSet, international-stock ETFs (excluding “global” funds, which have U.S. exposure), have gathered $31 billion in net new assets in the first two months of this year, compared with $30 billion for all of 2020.”

ERSX 6 Month Total Return

With International Stocks, the Factors Matter

Getting international exposure is a great way to pull in uncorrelated market movements. But at a time when a pandemic has the whole world in its grasp, it becomes quite the challenge.

Many ex-U.S. markets are considered value destinations. ERSX offers quality/value tilts with several of its components holdings.

“The International Monetary Fund is projecting 5.5% global GDP growth in 2021, with growth in emerging markets and developing economies as a group projected at 6.3%, led by India (11.5%) and China (8.1%). Among developed economies, Spain (5.9%), France (5.5%) and the U.K. (4.5%) are expected to grow at a faster pace than the projected 4.3% for advanced economies as a whole. (The IMF estimates U.S. GDP growth at 5.1% in 2021.),” according to the Journal.

Small cap investors already know that looking at equities outside the large cap universe can yield substantial gains, but one area they may not have considered is looking abroad.

ERSX isn’t any old small cap ETF. It blends domestic and international exposure, which is relevant at time when many markets are betting international smaller stocks will top U.S. equivalents. Non-U.S. equities are poised to take flight, and it’s possible that this asset class is in for a substantial period of out-performance.

ENTR’s Quality Growth Proposition Is Getting More Attractive

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Amid raucous market action, the bulk of which is being caused by rising Treasury yields, the ERShares Entrepreneurs ETF (ENTR) is becoming more attractive on the basis of price, while its underlying fundamentals remain sound.

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

See also: The Entrepreneur Factor: Distinguishing Characteristics of Dynamic, Disruptive Investing

There has been a significant shift in how companies conduct business over the last year, with many corporations transitioning their employees to the home as more stringent regulations become commonplace. With this shift comes a need for innovation, with companies like Ring, Crowdstrike, Tesla, and Fiverr embracing an entrepreneurial mindset. Investors looking to get in on the action can look to the issuer ERShares.

ERShares selects companies from all over the globe and across capitalization levels to create an eclectic and well-balanced mix in its funds.

ENTR 6 Month Total Performance

ENTR Standing Out from the Crowd

ENTR is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. The fund has exhibited excess return potential by taking into consideration factors that account for alpha generation, such as growth, size, momentum, and value, among others.

“Investors, or academics, that presume we are simply a ‘growth play’ or ‘momentum play’ are often surprised to discover that our Entrepreneur Factor is not only significant in explaining historical returns, but over the past 12 years has been, by far, the most significant factor,” according to the issuer. “The selection effect (Entrepreneur Factor) actually compensates for all the other factors, which in aggregate are actually negative during the time period. This is why the selection effect is even higher than the excess return itself.”

Why Non-U.S. Small Caps Are Compelling Long-Term Investments

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International small caps are one of the most overlooked asset classes in the ETF investing space. The ERShares NextGen Entrepreneurs ETF (ERSX) is showing investors exactly why this group shouldn’t be ignored.

ERSX selects the most entrepreneurial, primarily Non-U.S. Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

“For several years, investors have done well by focusing on megacaps. But over the long term, foreign small- and midsize companies—or ‘smid’—have outperformed other types of companies, particularly in Europe and Japan,” reports Reshma Kapadia for Barron’s.

The Case for ‘ERSX’

International equities have increasingly become an attractive option for investors looking to generate income and pursue higher total return potential. Investors may want to take cues from institutional players today and not wait until 2022 for international allocations.

“In addition to being well-positioned for a recovery, the relative valuation for global SMID stocks is also attractive,” adds Barron’s. “Those foreign stocks are typically cheaper than their U.S. counterparts. Picking small- or midsize stocks can be hard in the U.S.—and even more difficult abroad—so a diversified, index-based approach may be easier for investors.”

Building wealth can be a painstaking process in a world where most are seeking immediate returns. Yet for those brimming with discipline, small increments allocated toward small cap strategies can pay off in the long run.

While small cap value appears to be solidifying, that doesn’t mean small cap growth is going to lag. Fortunately for investors, the ERShares ETF addresses both factors.

ERSX 1 Year Performance