Should Janus Henderson Small Cap Growth Alpha ETF (JSML) Be on Your Investing Radar?

The Janus Henderson Small Cap Growth Alpha ETF (JSML) is designed to provide broad exposure to the Small Cap Growth segment of the US equity market. Launched on February 23, 2016, and sponsored by Janus Henderson, this passively managed exchange-traded fund has accumulated over $242.91 million in assets, making it a notable player among ETFs aimed at capitalizing on the small cap growth market.

Why Small Cap Growth?

Investing in small cap companies presents a compelling opportunity, primarily due to their potential for substantial growth. Companies with market capitalizations below $2 billion are typically in a position to achieve higher growth rates compared to their larger counterparts. However, this potential comes with increased risks. Growth stocks generally demonstrate higher sales and earnings growth rates but tend to be valued at higher multiples. This aspect means that while they may outperform value stocks in strong bull markets, value investments historically offer better returns across various market conditions.

Costs to Consider

When investing in ETFs, monitoring the expense ratio is crucial, as lower-cost products tend to yield better long-term results compared to their higher-cost counterparts, assuming other factors remain constant. The JSML has an annual operating expense ratio of 0.30%, which aligns with most peer products in this investment space. It also boasts a 12-month trailing dividend yield of 0.44%.

Sector Exposure and Top Holdings

Diversification is one of the key benefits of ETFs, which can help minimize single stock risk. However, it is essential for investors to review the actual holdings within the fund. The JSML ETF has a significant allocation to the Industrials sector, making up about 29.90% of the portfolio. Following this are the Healthcare and Information Technology sectors, which round out the top three. The top individual holding in the fund is Doximity Inc. Class A (DOCS), accounting for approximately 3.63% of total assets, followed by Corcept Therapeutics Incorporated (CORT) and Corvel Corporation (CRVL). Collectively, the top ten holdings represent about 24.51% of the total assets under management.

Performance and Risk

The JSML ETF aims to match the performance of the Janus Small Cap Growth Alpha Index before fees and expenses. This index selects small-sized capitalization stocks that are positioned for smart growth through a comprehensive evaluation based on growth, profitability, and capital efficiency metrics. Over the course of the current year, the ETF has presented an impressive 12.93% return and has surged approximately 33.87% over the last year (as of October 21, 2024). In the previous 52 weeks, the ETF traded within the range of $47.39 and $66.71. It has a beta of 1.25 and a standard deviation of 25.31% for the trailing three-year period, providing an effective diversification of company-specific risk with around 206 holdings.

Alternatives to Consider

Currently, the Janus Henderson Small Cap Growth Alpha ETF holds an ETF Rank of 3 (Hold), a rating based on expected asset class returns, expense ratios, and market momentum, among other factors. This makes it a suitable option for those looking for exposure in the Style Box – Small Cap Growth area of the market. Investors may want to explore other ETF options in this category, such as the iShares Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK), both of which track similar indices. The IWO has $12.26 billion in assets, while VBK boasts $18.51 billion, with expense ratios of 0.24% and 0.07%, respectively.

Conclusion

Investors, both retail and institutional, are increasingly gravitating toward passively managed ETFs. These products offer a range of advantages including low costs, transparency, flexibility, and tax efficiency, making them excellent vehicles for long-term investment strategies. To explore this ETF further and to identify other investment products that fit your investment objectives, consider visiting the ETF Center and keep informed on the latest developments within the ETF investing landscape.