Small Caps Win On Trump Rally: 5 Top ETFs & Stocks

Market sentiments turned extremely bullish after the election with most indices logging in the best week in five years. Though the Dow Jones rose 3.2% since November 8, the Russell 2000 is outperforming with 9% gains.

The returns were mainly driven by Trump’s massive stimulus policies that should benefit small caps more as these are closely tied to the U.S. economy and generate most of their revenues from the domestic market. He seeks to double the pace of economic growth from the current 2%, create 25 million jobs over 10 years, and make the U.S. economy the strongest in the world.

Additionally, comparatively higher weightings to healthcare and financials – the two sectors that Trump loves – have given an edge to the Russell 2000 Index. Trump seeks fewer regulations in these sectors (read: The Trump Effect: 8 Must-See ETF Charts).

Small cap stocks generally outperform when the American economy is leading the way. Since these companies are small, they are poised to grow more than their already tapped out large-cap counterparts. Further, Trump’s proposed renegotiation or termination of the North American Free Trade Agreement and building a Mexico wall would favor small cap stocks in case it results in a trade war or a tariff increase as expected.

Given this, there have been winners in many corners of the small cap space. Below we have presented five ETFs & stocks that have easily crushed the Russell 2000 index and are likely to continue their strong performance going forward:

Best ETFs

All these funds have a favorable Zacks Rank of 1 (Strong Buy), 2 (Buy) or 3 (Hold), suggesting more room for upside.

BioShares Biotechnology Clinical Trials Fund (MZ:BBC)

This ETF provides exposure to biotechnology companies that have a primary product in Phase I, II, or III of FDA trials by tracking the LifeSci Biotechnology Clinical Trials Index (read: 5 Reasons to Buy 5 Low P/E Biotech ETFs).

Zacks ETF Rank: #3
AUM: $22.1 million
Expense Ratio: 0.85%
5-Day Return: 21.1%

Guggenheim S&P SmallCap 600 Pure Value ETF RZV

This fund provides pure exposure to the small cap value segment of the U.S. equity market by tracking the S&P SmallCap 600 Pure Value Index.

Zacks ETF Rank: #3
AUM: $218.8 million
Expense Ratio: 0.35%
5-Day Return: 14.1%

PowerShares S&P SmallCap Materials Fund PSCM

This ETF targets the material sector and tracks the S&P SmallCap 600 Capped Materials Index (read: Sector ETFs Hitting 52-Week High on Trump's Victory).

Zacks ETF Rank: #2
AUM: $26.9 million
Expense Ratio: 0.29%
5-Day Return: 13.5%

PowerShares S&P SmallCap Financials Portfolio PSCF

This product follows the S&P SmallCap 600 Capped Financials Index, which measures the performance of the companies engaged in the business of providing services and products, including banking, investment services, insurance and real estate finance services.

Zacks ETF Rank: #3
AUM: $216.4 million
Expense Ratio: 0.29%
5-Day Return: 12.2%

RevenueShares Small Cap Fund RWJ

This product tracks the RevenueShares Small Cap Index and offers exposure to stocks that are weighted by revenues instead of market capitalization.

Zacks ETF Rank: #3
AUM: $365.4 million
Expense Ratio: 0.39%
5-Day Return: 12.0%

Best Stocks

We have used our Zacks stock screener to find out the best performing stocks in the small cap space and then narrowed down the list of the stocks having a Zacks Rank #1 or 2 and a Growth Style Score of ‘B’ or better.

The Growth Style Score analyzes the growth prospects of a company following a thorough analysis of the income statement, balance sheet and cash flow statement that evaluate its financial health and the sustainability of its growth trajectory. The results show that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 or 2 offer the best upside potential.

Health Insurance Innovations Inc. (NASDAQ:HIIQ)

This Florida-based company operates as a developer and administrator of cloud-based individual health and family insurance plans, and supplemental products in the United States (read: Trump Triumphs: Stocks & ETFs to Rock or Shock).

Zacks Rank: #1
Growth Style Score: A
Market Cap: $150.2 million
5-Day Return: 74.6%

Airgain Inc. (NASDAQ:AIRG)

This California-based company is engaged in designing, developing, and engineering antenna products for original equipment and design manufacturers, chipset vendors, and service providers worldwide.

Zacks Rank: #2
Growth Style Score: B
Market Cap: $147.4 million
5-Day Return: 60.6%

Genco Shipping & Trading Ltd. (NYSE:GNK)

This New York-based company is engaged in the ocean transportation of dry bulk cargoes through the ownership and operation of dry bulk carrier vessels worldwide.

Zacks Rank: #2
Growth Style Score: B
Market Cap: $60.7 million
5-Day Return: 47.8%

Kronos Worldwide Inc. (NYSE:KRO)

This Texas-based company is a global producer and marketer of value-added titanium dioxide pigments (see: all the Small Caps ETFs here).

Zacks Rank: #1
Growth Style Score: A
Market Cap: $1.3 billion
5-Day Return: 42.9%

Sucampo Pharmaceuticals Inc. (NASDAQ:SCMP)

This Maryland-based company is engaged in the research and development of proprietary drugs for the treatment of gastrointestinal, ophthalmic, autoimmune, and oncology-based inflammatory disorders in the United States, Japan, Switzerland and internationally.

Zacks Rank: #1
Growth Style Score: A
Market Cap: $730.8 million
5-Day Return: 36.9%

Bottom Line

These ETFs and stocks could be lucrative picks going forward, as small caps are considered the barometer of the domestic economy and are poised for accelerated growth under the Trump presidency.

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