If You Keep Cash In A U.S. Bank Account… Read This NOW

Dear Reader,

The Treasury Department just issued a stunning warning:

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Regards,

Addison Wiggin

Founder, Grey Swan Investment Fraternity

Tuesday's Featured Article

This ETF Weeds Out Small-Cap Underperformers

Written by Jordan Chussler. Published 9/29/2025.

Key Points

This year, small-cap stocks have made their case for inclusion in a well-diversified portfolio.
Index funds that track the Russell 2000 provide broad exposure but can limit upside potential with excessive holdings.
Alternatively, the IJR limits its positions to established U.S. small-caps stocks that demonstrate a recent track record of sound earnings performance.

Earlier this year, when President Trump's tariff-driven volatility sparked the "sell America" trade, investors exited large-cap U.S. equities in search of safer bets. Surprisingly, much of that money flowed into U.S. small caps rather than overseas.

The Russell 2000 index saw massive inflows as uncertainty gripped the market. Between April 3 and April 9, small caps—which trade an average of 5.1 million shares daily—drew 7.2 million to 9.5 million shares in net daily inflows. From its year-to-date low on April 8 through the time of writing, the Russell 2000 is up over 38%, outpacing the S&P 500 by about five percentage points.

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Not all small caps perform equally. The iShares Russell 2000 ETF (NYSEARCA: IWM) tracks about 2,000 stocks, while the Vanguard Small-Cap ETF (NYSEARCA: VB) holds roughly 1,100 names. Broad exposure, however, can include underperformers.

To capture the upside of small caps, one ETF filters out weaker stocks, focusing on the financially strongest companies within the index.

This ETF's Small-Cap Strategy Picks Winners

The iShares Core S&P Small-Cap ETF (NYSEARCA: IJR) takes a different approach. Its 637 holdings consist of U.S.-based, financially sound companies that meet strict requirements.

To qualify, stocks must be at least one year past their IPO and have positive earnings in the latest quarter and over the sum of the four preceding quarters.

Since its inception on June 2, 2000, the ETF has experienced only five drawdowns exceeding 20%—during the Great Recession, the 2018 market correction, the 2020 pandemic crash, the 2022 bear market, and April's tariff-induced pullback—and each time it recovered swiftly. To date, IJR has gained nearly 579% while offering a 1.93% dividend yield ($2.29 per share annually) and charging a low 0.06% expense ratio.

The IJR's Basket of Best-in-Class Holdings

IJR focuses on small caps with market caps between $300 million and $1 billion, highlighting stocks that may be less familiar but represent top performers in the U.S. small-cap universe. Its top five holdings include:

Mr. Cooper Group (NASDAQ: COOP), a non-bank mortgage servicer
Kratos Defense & Security Solutions (NASDAQ: KTOS), a provider of national security and defense solutions
Sandisk (NASDAQ: SNDK), a data storage solutions provider
BorgWarner (NYSE: BWA), an automotive supplier
SPX Technologies (NYSE: SPXC), an industrial and municipal engineered products provider

By sector, financials account for nearly 25% of IJR, aligning with a bullish outlook as the Federal Reserve begins cutting rates. Consumer discretionary follows at over 16%, with industrials, health care, and technology rounding out the top five allocations.

IJR's focused approach offers strong small-cap diversification without owning the thousands of stocks in the Russell 2000.

Here's What Wall Street Thinks About IJR

Short interest in IJR stands at just 0.52% of its 726.7 million shares outstanding. Although this marks a 26% increase month-over-month, fewer than 1% of traders are betting on a near-term decline.

Institutional investors own about 67% of IJR, with net inflows of $15.23 billion versus $4.73 billion in outflows over the past 12 months.

IJR has a consensus Moderate Buy rating from 23 analysts, none of whom rate it as a Sell or Strong Sell.

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