IJS: A Potential Leader in the Small-Cap Value Sector

The iShares S&P Small-Cap 600 Value ETF, better known as IJS, has shown a promising uptrend since October 27, outpacing large-cap growth indices. With a 14.64% gain compared to the large-cap growth's SPYG's 10.70% gain, indicators sugests a shift in market preference towards small-cap value stocks. Current economic conditions appear to be aligning in favor of such investments.

IJS ETF Fundamentals

The IJS ETF, established in 2000 by iShares, specifically targets small-cap stocks that are considered to be undervalued. This low-cost fund, with an expense ratio of 0.18%, has accumulated assets under management of $6.55 billion. As of late November 2023, IJS has 474 holdings across various sectors, with the greatest investments in Consumer Discretionary, Financial Services, Industrials, and Real Estate, balancing the portfolio and avoiding concentration risk.

Investment Thesis for IJS

Several factors contribute to our positive outlook on IJS. Fundamentally, the recent dip in Treasury bond interest rates bodes well for small-cap stocks, providing a more conducive business environment. Technically, IJS has demonstrated a robust trend reversal as of the end of October. Moreover, the market sentiment is trending from growth stocks to value and from large-caps towards small-caps, positioning IJS for what seems to be a market correction phase favoring undervalued small-cap stocks.

Understanding Market Dynamics

An intermarket analysis looking at risk indicators suggests a risk-on environment, underpinning a rally in broader stock markets, potentially extending into the remaining months of the year. This is reinforced by the decreasing market volatility, with VIX levels showing a steady decline throughout November.

Conclusion: Opportunity in Small-Cap Value

The culmination of technical, fundamental, and market sentiment factors presents an opportunity. With the indicators pointing to a favorable market state for small-cap value stocks, IJS stands out as a compelling investment within the small-cap ETF landscape. Given its current performance trajectory and market conditions, our rating for IJS is a solid BUY.

IJS, ETFs, Small-Cap, Value, Outperform, Technical, Intermarket, Analysis