Could now be the time to consider small caps? Rate cuts once again, appear imminent, now backed by explicit comments from Fed Chair Jerome Powell. Smaller firms could potentially benefit disproportionately from cuts, but of course, identifying the right small caps is the question. The quality small cap ETF OUSM may stand out as an option, with a quarter billion in one year flows.
See more: ETF of the Week: ALPS O’Shares U.S. Small-Cap Quality Dividend ETF
The ALPS O’Shares US Small-Cap Quality Dividend ETF (OUSM ) hasn’t just picked up $267.25 million in net inflows over one year. That total also represents an uptick in flows over time, with inflows accelerating since July of last year. Those flows have helped the quality small cap ETF see a net $361.3 million AUM increase in that time. Intriguingly, both flows and price influence have combined to push that AUM higher.
What then is the outlook for the strategy moving forward behind that flows momentum? The quality small cap ETF tracks an index of U.S. small-cap stocks weighted for factors like low volatility and quality. What sets it apart from other small cap strategies, even those with quality, is its use of dividend quality and yield as factors, too. By combining factors, it looks to rank potential holdings for inclusion in the index. The fund caps single holdings at 2%, with sectors capped at 22% overall.
That has helped OUSM not only pull in that quarter billion in flows, but also return 14.1% over the last one year period. Per SS&C ALPS data, that one year return saw OUSM outperform the Morningstar U.S. Small-Cap Board Value Extended Index. OUSM’s 14.1% NAV return in one year stands out relative to the latter index’s 9.8%. On a YTD basis, that difference appears even more stark – OUSM has returned 5.9% YTD to the index’s -1.1% return.
That flows momentum appeal, but so too does the strategy’s price momentum per its tech chart. According to YChart data, the strategy has recently sent a notable buy signal. Its price has risen above both its 50 and 200-day Simple Moving Averages (SMAs). Taken together, OUSM may be positioned to appeal to investors.
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