- Small-cap stocks are expected to outperform over the next 12 months.
- These 3 Vanguard small-cap ETFs are anticipated to have the most upside.
- All 3 would make a good addition to a diversified portfolio.
These 3 Vanguard ETFs are poised to go on a run over the next 12 to 18 months.
In times of market uncertainty, ETFs are a popular choice to hedge your bets and diversify your assets. And while there are a lot of great ETF fund families, we’ll focus right now on Vanguard, the second-largest ETF provider and one of the fastest-growing.
Like the other large fund families, Vanguard offers ETFs that tap into every corner of the investable universe of stocks. But there is one area in particular that investors should be zeroed in on right now and that is small caps.
Beaten down small caps, which have been massively outperformed by large caps, are poised to break out. An analysis of Wall Street analysts’ price targets for Vanguard ETFs shows that its small-cap ETFs have the highest upside.
Here are 3 great Vanguard small-cap ETFs to consider right now.
1. Vanguard Russell 2000 Growth ETF
The Vanguard Russell 2000 Growth ETF (NASDAQ:VTWG) has the most upside, according to Wall Street analysts who cover the fund. It has an average 12-month price target of $253 per share, which is 32% higher than the current price.
As the name suggests, this ETF invests in growth stocks with the small-cap Russell 2000 universe. It is broadly diversified, with some 1,132 different small cap growth stocks in the portfolio. About 25% of the portfolio is in healthcare stocks, with another 25% in industrials, and 18% in technology.
The three largest holdings are Insmed (NASDAQ:INSM), a biotech company, FTAI Aviation (NASDAQ:FTAI), and Sprouts Farmers Market (NASDAQ:SFM).
The ETF is up about 5% year-to-date and 18% over the past 12 months. It has a five-year annualized return of 8.4% and a 10-year annualized return of 8.3%. Also, it has an expense ratio of 0.15%.
2. Vanguard Russell 2000 ETF
The Vanguard Russell 2000 ETF (NASDAQ:VTWO) is the most diversified option, as it invests in the entire Russell 2000 index. It has a median price target of $107 per share, which suggests 28% growth over the next 12 months.
This small-cap blend fund invests in 2006 stocks with 19% in industrials, 17% in financials, and 11% in technology. Its top three holdings are the same as the Vanguard Russell 2000 Growth ETF, only the positions are slightly smaller in this more diversified fund.
The Vanguard Russell 2000 ETF is up about 3% YTD with a one-year return of 18.4%. Further, it has a five-year annualized return of 9.7% and a 10-year annualized return of 8.1%. Also, it has a lower expense ratio than its growth counterpart at 0.10%.
3. Vanguard Russell 2000 Value ETF
The Vanguard Russell 2000 Value ETF (NASDAQ:VTWV) rounds out the small-cap trifecta of Vanguard ETFs. Wall Street analysts target a 25% price increase over the next 12 months for this value-focused fund.
This ETF invests in value stocks within the Russell 2000 and holds about 1,450 stocks. The largest sector in this fund is financials, making up 27% of the fund. Consumer discretionary is next at 13.4%, followed by industrials at 12.7%. It also has 11% in real estate stocks.
The three largest holdings are South State Corp (NYSE:SSB), a Florida-based bank, Meritage Homes (NYSE:MTH), a homebuilder, and Taylor Morrison Home (NYSE:TMHC), another homebuilder.
This ETF is up about 2% YTD and 19% over the past year. It has a five-year annualized return of 10.4% and a 10-year annualized return of 7.4%. Its expense ratio is 0.15%.
Poised to Outperform
All three of these small caps ETFs are poised to outperform over the next 12 months or so, as small caps are expected to come back into favor as the market broadens beyond large caps.
As an investor, if you were two invest in two of these ETFs, it might be wise to choose the Russell 2000 Growth and the Russell 2000 Value ETF for maximum small-cap diversification.
If you only want to invest in one, pick the Russell 2000 ETF.