VBK: No Edge Over Competitors, Except Fees And Liquidity (NYSEARCA:VBK)

syahrir maulana VBK strategy Vanguard Small-Cap Growth Index Fund ETF Shares (NYSEARCA:VBK) started investing operations on 01/26/2004 and tracks the CRSP US Small Cap Growth Index. It has 624 holdings, a 30-day SEC yield of 0.56%, an expense ratio of 0.07%, and is also available as a mutual fund, Vanguard Small Cap Growth Index Fund Inst (VSGAX). As described by CRSP, the underlying index “represents the Growth Style for companies covering 85% to 98% of cumulative capitalization of CRSP US Total Market.” It is rebalanced quarterly. No more information about the methodology is available to the public on the CRSP website or in the fund’s prospectus. The fund’s turnover rate in the most recent fiscal year was 19%. This article will use as a benchmark the parent index, CRSP US Small Cap Index, represented by Vanguard Small-Cap Index Fund ETF Shares (VB). VBK portfolio The heaviest sector in the portfolio is technology (22.6% of asset value), followed by industrials (19.8%), consumer discretionary (16.4%) and healthcare (tie at 16.4%). Other sectors are below 7%. Compared to the parent index, VBK significantly overweights technology and healthcare. It underweights mostly financials, materials and utilities. VBK sector breakdown (Chart: author; data: Vanguard) The top 10 holdings, listed in the next table with growth metrics, represent 8% of asset value. The top name weighs 1.09%, so risks related to individual companies are low. Ticker Name Weight% EPSgrowth %TTM EPSgrowth %5Y SalesGrowth %TTM SalesGrowth %5Y TRGP Targa Resources Corp. 1.09% 25.52 54.79 -20.22 8.15 AXON Axon Enterprise, Inc. 0.96% 81.77 35.57 31.69 30.06 DECK Deckers Outdoor Corporation 0.90% 50.87 26.96 18.29 16.34 PTC PTC Inc. 0.86% -10.10 36.14 13.33 11.04 ENTG Entegris, Inc. 0.85% 7866.66 -6.65 -5.13 17.85 DKNG DraftKings Inc. 0.76% 59.76 N/A 57.00 N/A VRT Vertiv Holdings Co. 0.72% 245.17 82.85 15.27 N/A PSTG Pure Storage, Inc. 0.65% 796.14 17.53 7.80 15.79 LII Lennox International Inc. 0.63% 20.17 13.61 4.74 5.11 NTNX Nutanix, Inc. 0.63% 95.61 6.92 19.43 10.02 Click to enlarge Fundamentals VBK is more expensive than the benchmark regarding valuation ratios and has better growth metrics, in accordance with its investing style. As reported in the next table, the gap in cash flow growth is the most impressive. VBK VB P/E TTM 26.76 17.53 Price/Book 3.83 2.23 Price/Sales 2.92 1.36 Price/Cash Flow 15.64 10.45 Earnings growth 23.12% 19.68% Sales growth % 9.38% 6.51% Cash flow growth % 22.09% 8.93% Click to enlarge Data source: Fidelity. Performance Since 02/1/2004 VBK has underperformed its parent index by 14 bps, which is hardly significant. It also shows similar risk metrics, as reported in the next table (maximum drawdown and volatility). Total Return Annual Return Drawdown Sharpe ratio Volatility VBK 476.35% 8.99% -58.69% 0.46 19.84% VB 491.91% 9.13% -59.57% 0.48 19.31% Click to enlarge The growth fund has lagged by about 9% over the last 3 years: VBK vs VB, 3-year returns (Seeking Alpha) VBK vs. competitors The next table compares the characteristics of VBK and five small-cap growth ETFs implementing various methodologies: iShares S&P Small-Cap 600 Growth ETF (IJT). iShares Russell 2000 Growth ETF (IWO). iShares Morningstar Small-Cap Growth ETF (ISCG). First Trust Small Cap Growth AlphaDEX Fund ETF (FYC). Janus Henderson Small Cap Growth Alpha ETF (JSML). VBK IJT IWO ISCG FYC JSML Inception 1/26/2004 7/24/2000 7/24/2000 6/28/2004 4/19/2011 2/23/2016 Expense Ratio 0.07% 0.18% 0.24% 0.06% 0.70% 0.30% AUM $34.19B $5.80B $10.87B $545.44M $268.66M $211.95M Avg Daily Volume $60.96M $11.70M $98.84M $1.51M $717.60K $584.93K Click to enlarge VBK is the largest and second most liquid of these funds. It has the second-lowest fee, almost on par with ISCG. The next chart compares total returns, starting on 2/29/2016 to match all inception dates. Five of the 6 funds are in a narrow range of total return. VBK is in the middle of the pack, about 0.5% in annualized return behind the best performer JSML. VBK vs. competitors, since 2/29/2016 (Seeking Alpha) Over the last 12 months, VBK is very close to several of its peers and behind IJT: VBK vs. competitors, trailing 12 months (Seeking Alpha) Takeaway Vanguard Small-Cap Growth Index Fund ETF Shares (VBK) holds over 600 small caps with growth characteristics. It is well-diversified across holdings and sectors, with a tilt to technology and industrials. Based on historical performance, VBK doesn’t seem to have a methodological edge over its competitors or over a small-cap benchmark. Despite this lack of attractiveness as a long-term investment, its combination of relatively high liquidity and low fees makes it a good instrument for tactical allocation strategies switching between size segments or investing styles.

Buy cryptocurrency

Source link

Refer And Earn Demat Account – Get ₹300 | Referral Program

Open Demat Account In Angel One For FREE