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As Earnings Season Kicks Off, 2 ETFs Worth Watching For Buyable Dips

As Earnings Season Kicks Off, 2 ETFs Worth Watching For Buyable Dips

Recent days brought new all-time-highs to the S&P 500 and NASDAQ 100, which are up about 14% and 12%, respectively, in 2021. Meanwhile, the Dow Jones Industrial Average, which hit a record high in May, has returned 12% so far this year.

July means the start of a new earnings season that could see increased choppiness as well as potential profit-taking in a range of stocks that have done well so far this year. Therefore, today we discuss two exchange-traded funds (ETFs) that could see short-term declines. Interested readers could regard such declines as a better opportunity to buy into either fund.

1. iShares Micro-Cap ETF

Current Price: $153.8352-Week Range: $83.29 – $159.56Dividend Yield: 0.75%Expense Ratio: 0.60% per year

iShares Micro-Cap ETF (NYSE:IWC) gives exposure to US micro-capitalization equities. The fund, which seeks long-term growth, tracks the Russell Microcap Index, which is reconstituted annually.

IWC currently has 1,283 holdings. Since its inception in August 2005, net assets have grown to $1.5 billion. In terms of industries, health care has the largest slice (26.23%), followed by financials (18.35%), consumer discretionaries (16.57%), information technology (11.77%) and industrials (10.99%). The top 10 holdings comprise nearly 9% of the fund.

Among the leading names in the roster are the omni-channel video game retailer GameStop (NYSE:GME), which is heavily traded as a meme stock; mobile-advertising technology group Digital Turbine (NASDAQ:APPS); genome editing firm Intellia Therapeutics (NASDAQ:NTLA), online retailer Overstock.com (NASDAQ:OSTK), which has significant exposure to the cryptocurrency space; and the sell-side advertising platform Magnite (NASDAQ:MGNI).

In the past year, IWC is up 84% and year-to-date it has returned more than 30%. Trailing P/E and P/B ratios are 17.28 and 2.37, respectively. The fund saw a record high in mid-March.

Mid-caps offer high growth potential but also exhibit greater risk of volatility. Some consolidation is likely in the coming weeks. Long-term investors could consider buying in at around $145 or below. We like the sectoral diversity.

2. ProShares Pet Care ETF

Current Price: $81.6752-Week Range: $48.68 – $81.68Dividend Yield: 0.21%Expense Ratio: 0.50% per year

Last year, pet owners in the US spent $103.6 billion on their much-loved animals. For 2021, analysts expect that number to reach $109.6 billion. Recent metrics also suggest, “Sixty-seven percent of US households, or about 85 million families, own a pet.”

The ProShares Pet Care (NYSE:PAWZ), which has 25 holdings, provides exposure to firms that should benefit from an increase in pet ownership. The fund was first listed in November 2018.

As Earnings Season Kicks Off, 2 ETFs Worth Watching For Buyable Dips
PAWZ Weekly

PAWZ, which tracks the FactSet Pet Care Index, currently has 31 stocks. About 71% of the firms come from the US, followed by the UK (15.42%), Switzerland (4.32%) and Germany (2.39%).

Idexx Laboratories (NASDAQ:IDXX), which focuses on animal veterinary, water testing and dairy markets; the leading manufacturer of medicine and vaccinations for pets and livestock Zoetis (NYSE:ZTS); Freshpet (NASDAQ:FRPT), which distributes fresh, refrigerated food for pets; and online retailer of pet products Chewy (NYSE:CHWY) top the list in the fund, whose net assets are close to $268 million.

Since the beginning of the year, the fund has grown by more than 13% and hit a new record high on June 28. Its P/E and P/B ratios of 35.10 and 6.13, respectively, point a frothy valuation level. A potential decline toward $75 would improve the margin of safety for buy-and-hold investors. The global long-term trends for the industry look robust.


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