Inflation Slows Small Cap Rally, But SMCP ETF Offers Strategic Entry Point
Detroit, Michigan
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July 01, 2024 08:45 AM Eastern Daylight Time
By Josh Enomoto, Benzinga
ZINGER KEY POINTS
• SMCP offers speculators an opportunity to spread their risk across several small companies with potentially big upside.
• The ETF is currently trading within a horizontal consolidation pattern that may provide an intriguing entry point.
Investors looking to dial up their risk-reward profile typically consider targeting small publicly traded enterprises that offer robust upside potential. Of course, the main threat to this framework is volatility. While that risk can never be completely mitigated, the AlphaMark Actively Managed Small Cap ETF (SMCP) provides market speculators with a more sensible platform.
Fundamentally, the SMCP exchange-traded fund offers two core advantages. Firstly, AlphaMark is actively managed, which means that the investment vehicle is guided by a professional. As market conditions change, the SMCP may navigate around certain pitfalls. Secondly, the ETF encompasses a wide range of individual enterprises. Therefore, no one company will completely sink the portfolio.
Generally, small-capitalization firms have not always performed well. One of the headwinds impacting the ecosystem have been elevated benchmark interest rates. According to Reuters1,
small caps started surging in late 2023 – as reflected by the rising per-unit price of SMCP – due to speculation of incoming rate cuts. However, the acceleration eventually faded as inflationary pressures stubbornly stood their ground.
Nevertheless, some relief in this department could possibly be on the way. Based on the latest information 2 from the Labor Department, while the number of new applicants for jobless claims decreased from the prior week, the total number of people requesting some form of government assistance increased. This dynamic suggests that the red-hot labor market is beginning to cool.
Naturally, the framework presents a possible incentivization for the Federal Reserve to present a more accommodative or dovish shift in monetary policy. If so, that could potentially reignite sentiment in small-cap entities, which may have a positive effect on SMCP.
Presently, the top holding of the fund is Abercrombie & Fitch Co. (NYSE: ANF), an omnichannel retailer of popular apparel brands. ANF represents 1.48% of the small-cap fund. Coming in second place is Fabrinet (NYSE: FN), an enterprise in the electronic components segment that provides optical packaging and precision manufacturing services. It carries a fund weighting of 1.38%.
Rounding out the top three is Neogen Corporation (NASDAQ: NEOG), which falls under the diagnostics and research sector of the healthcare ecosystem. It focuses on products and services dedicated to food and animal safety and features 1.31% of the SMCP ETF. Visit https://alphamarkadvisors.com/etf/ to obtain Top 10 holdings of SMCP ETF.
To be sure, small-cap stocks present a higher-risk profile than that of mid or especially large cap firms. Primarily, small caps simply require more due diligence. Part of the reason is that because the underlying businesses tend to be relatively diminutive, not many analysts cover the space. As a result, there are likely to be informational gaps. These gaps can catch unprepared investors off guard yet this unpredictability also facilitates opportunities for upside.
The SMCP Chart: Since its public market debut in 2015, the SMCP ETF has returned 20%. Perhaps not surprisingly, the fund tends to be choppy, with some of the strongest players lifting the portfolio while downside performances in the least-promising names have caused snap volatility.
• Over the past 52 weeks, the SMCP is up around 20% based on closing prices. Since approximately early March, however, the ETF has entered into a sideways trend channel. That might present an entry point for prospective investors, especially as the market appears to be looking for its next big catalyst.
• At the moment, SMCP trades hands at $30.60. That’s modestly above its 50-day moving average, which comes in at $30.49. However, the fund is also a hair below its 20 DMA (Displaced Moving Average), which stands at $30.77. Notably, an upside resistance line has materialized at the $31 level. That would be the next logical target for the fund to cross.
• A support line has been established at the $30 level. That’s also a psychologically satisfying whole number that the bulls need to maintain. Bearish traders will attempt to drive down the price below this key threshold, which could trigger automated sell orders.
• A big acquisition volume spike that flashed on the June 17 session will offer encouragement to the optimists, especially as they wait for news that could benefit small caps, such as an accommodative (dovish) monetary policy.
Past performance is not a guarantee of future results. The investment return and the principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data cited. Current month-end data is available at 859-957-1803.
Visit https://alphamarkadvisors.com/etf/ for more information about the AlphaMark Actively Managed Small Cap ETF. Standardized fund performance can also be found through the link in addition to more information.
Featured photo by StockSnap from Pixabay
The fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus and summary prospectus contains this and other important information about the investment company, or a free, hard-copy may be obtained by calling 1-800-730-3457. Read it carefully before investing. Investing involves risk. Principal loss is possible. Investing involves risk. Principal loss is possible. When the Fund invests in ADRs as a substitute for an investment directly in the Underlying Shares, the Fund is exposed to the risk that the ADRs may not provide a return that corresponds precisely with that of the Underlying Shares. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. A Fund that concentrates its investments in the securities of a particular sector area may be more volatile than a fund that invests in a broader range of industries.
The Fund invests in foreign securities which involve political, economic and currency risks, greater volatility and differences in accounting methods. These risks are greater for investments i n emerging markets. The Fund invests in smaller companies, which involve additional risks such as limited liquidity and greater volatility. REITs may have limited financial resources, may trade less frequently and in limited volume, and may be more volatile than other securities. Investing in investment companies, such as ETFs will subject the Fund to additional expenses of each investment company and risk of owning the underlying securities held by each. ETFs may trade at a premium or discount to their net asset value. ETFs are bought and sold at market price and not individually redeemed from the fund. Brokerage commissions will reduce returns. Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security. The SEC does not endorse, indemnify, approve, nor disapprove of any security.
AlphaMark Advisors LLC is the Advisor to the AlphaMark Actively Managed Small Cap ETF which is distributed by Quasar Distributors, LLC.
Footnotes:
2 https://www.reuters.com/markets/us/us-weekly-jobless-claims-fell-latest-week-2024-06-20/
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