What companies have the ASX’s ‘small-cap focused’ ETFs invested in?
Yesterday, the latest “small-cap focused” ETF launched on the ASX. The eInvest Future Impact Small Caps Fund (ASX: IMPQ) was the eighth ETF whose name indicated they preferred small cap companies.
What was unique about this ETF was it was not only avoiding companies that may be perceived to be “unethical” (such as gambling stocks) but proactively flocking to stocks with positive ESG-metrics.
Stockhead revealed yesterday seven other ETFs that focused on small cap companies. Some of these manage entire portfolios, others just invested in a foreign ETF that manages a portfolio of stocks for them (these are the ETFs with only one holding).
The solid performance of these ETFs begged the question – “Which small caps stocks did they put their money into?”
Despite their name, it turned out there actually weren’t as many investments in smaller caps than we anticipated – and almost none that could be considered risky.
While there were very few small cap health or tech investments, there were some consumer stocks. Kogan (ASX: KGN) and Myer (ASX: MYR) were both popular. Myer was present in five.
Another popular stock was currency exchange play OFX Group (ASX: OFX). While many fintechs are not yet profitable, OFX is an exemption. It recorded a $17.6 million after tax profit in its most recent annual result released on Tuesday.
BetaShare’s ETF had invested in furniture stock Nick Scali (ASX: NCK), which has been one of the highest dividend paying small caps.
While most of these ETF’s mining investments were in larger stocks there were some smaller companies in their portfolios. One was rare earths takeover target Kidman Resources (ASX: KDR), held in the ETFs of iShares and Vanguard.
Oil producer Senex Energy (ASX: SKY), had already received the attention of the most analysts of any ASX small cap, but it is also in their ETFs
Lithium producer Altura Mining (ASX: AJM) was another popular stock, held by VanEck’s ETF.
One common large cap mining stock we found was Northern Star Minerals (ASX: NST), that used to be a micro-cap but in the last 10 years has risen 44,000 per cent.
Despite the recent housing slump in Australia, these ETFs had big positions on real estate stocks and real estate investment trusts. Vanguard had 9.36 per cent of its ETF in this sector.
The WAAX stocks (Wisetech, Afterpay, Altium, Appen and Xero) were also popular with Vanguard and iShares holding stakes in them. But considering their extensive portfolios, no ETF held more 2.12 per cent of any of these – iShare’s ETF held Afterpay.
Considering their year to date performance you cannot fault their choices. But the fund manager’s choices aren’t as risk-taking as the ETF focuses (smaller companies) would imply.