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Tag: International

Capture the Entrepreneurial Spirit of Fintech with the ENTR ETF

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Fintech is one of the premier disruptive technologies. For investors chasing access to the broader industry, the ERShares Entrepreneurs ETF (ENTR) is an exchange traded fund worthy of strong consideration.

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).

Fintech firms are companies that are powered by innovations, working to disintermediate or bypass the current financial markets and challenge traditional institutions by offering new solutions that are better, cheaper, faster, and more secure.

Stocks in this category, including Square and PayPal, have a myriad of tailwinds. Square and PayPal are currently challenging major credit card networks, a threat that is emerging more rapidly than many industry observers expected.

ENTR 1 Year Total Return

Investing in the Future of Fintech

Entrepreneurial FinTech companies such as Square are well positioned for explosive growth through customer acquisition, retention, and redeployment.

“Once consumers have grown accustomed to using primarily digital payments, many will not revert to traditional means,” according to UBS.

Adding to the allure of ENTR is the international reach of fintech, something the ERShares fund taps into.

The accelerating adoption of digital technologies in emerging economies will open growth opportunities for investors. Fintech is the middle man in the mass trend of disruption that is currently occurring with increased digitization. Once consumers can transact without friction online, then basic analog, communications, and relationships will shift online as well. Those themes are taking shape on a global scale.

Not surprisingly, China is fertile territory for ex-US fintech opportunities. China’s household wealth will increase significantly over the next two decades and discretionary income there is on the rise. Historically, the Chinese have invested heavily in real estate and bank deposits. Now, they’re shifting to stocks.

Nevertheless, fintech in the emerging markets remains in its nascent stages. Affordability has been the major bottleneck to mass adoption, especially when compared to digital transactions in developed countries. That’s not a negative. In fact, it highlights a longer-term play for investment vehicles like ENTR.

ERSX: A One-Stop ETF to Rectify Domestic Bias

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Investors often have a domestic basis, particularly with small cap stocks. They can help rectify large cap, domestic tendencies with 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.

Data confirm U.S. investors are under-allocated to international small caps.

“International Mid/Small-Cap stocks market value is 6% of the total world’s equity market, but US investors’ allocation is just 1.6% in mutual funds to this asset class,” according to Seeking Alpha.

ERSX 1 Year Performance

ERSX Perks

One of the highlights of small cap equity investing is the ability to capitalize on value-added growth companies that can provide room for more future gains. On the opposite end of the spectrum, large cap equities like big tech stocks may have already reached their peaks.

“One reason US investors should consider international stocks at this time is the trade-weight value of the USD is declining, which benefits international stocks,” adds Seeking Alpha.

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.

International small caps have “generated annual returns of only 6.7% for the past 10 years compared to 14% for the U.S. Large Company Index (per IFA data). However, valuations are attractive and there are two emerging catalysts that could propel the sector to outperform U.S. large caps in the coming years,” notes Seeking Alpha.

International small caps are generally export-oriented, globally structured, innovative, and have a high to dominant share of a niche market, often one in which the U.S. counterparts don’t compete effectively.

The Small Cap ERSX ETF: Hidden Gems Lie Abroad

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Investing in international small caps can be an exercise in finding hidden gems. The ERShares NextGen Entrepreneurs ETF (ERSX) makes that work easier.

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 ERShares ETF is useful for gaining exposure to an often overlooked asset class.

“Despite U.S. investors’ being very comfortable with international investing, small-cap companies (market cap of $300 million-$2 billion) outside the United States have generally flown under the radar. Yet upon closer review, they stand out for several attractive reasons,” reports Investment News. “For starters, of the more than 6,000 publicly traded global small-cap stocks, only about 2,000 are domiciled in the U.S., while two-thirds are based abroad. And a large proportion of those companies are in developed and emerging countries with established markets and liquidity. This represents an extremely large and deep pool of companies that many U.S. investment portfolios simply aren’t exposed to.”

ERSX 1 Year Holdings

The Right Way to Small Caps?

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.

“International small caps, while generally considered riskier than the other parts of equity markets, also exhibit lower correlations to other asset classes, including to their U.S. counterparts. This may be viewed as both an attractive and particularly timely characteristic that can help U.S. investors prepare for the inevitable rise in interest rates and the potential resulting market turbulence, provided they’re willing to look beyond the U.S. and take advantage of the opportunities globally,” adds Investment News.

ERSX Holdings

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

The ERSX ETF: International Small Caps Coming Into Their Own

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Investors usually love domestic small caps. They can wade into their international equivalents with the ERShares NextGen Entrepreneurs ETF (ERSX).

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.

ERSX offers plenty of benefits in the current climate.

Small cap companies’ nimble nature may position them to quickly evolve to take advantage of structural economic changes. Simultaneously, value stocks have the potential to outperform growth stocks during economic recoveries, with value-oriented industries tapping into pent-up demand created by the pandemic.

ERSX 1 Year Total Return

Global Pockets of Opportunity

With some long-running market trends poised to reverse this year, ERSX is all the more appealing.

“We’d be remiss to ignore the valuation profile of international small-cap value as well. Despite the attention they’ve earned this year, coupled with an impressive performance record, small-cap value stocks around the world still trade at comfortable discounts to their large-cap peers. That tells us that investors are not yet as serious about small caps as they should be, which creates an advantageous opportunity,” according to WisdomTree research.

Increasing the allure of ERSX, international small caps are generally export-oriented, globally-structured, innovative, and have a high to dominant share of a niche market, often one in which the U.S. counterparts don’t compete effectively.

Looking ahead, 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.

“Even with their auspicious start to the year, international small caps are still lagging U.S. small caps, so the inexpensive valuations of the former should reassure you that they may still have room to rally further without fear of overpaying,” adds WisdomTree.