ETFs that invest in small cap stocks and are weighted on a revenue basis are outperforming the more traditionally market-cap weighted small cap stocks.
In the column, Post-rally, Investors Ask: Where’s the Revenue?, the WSJ‘s Donna Kardos Yesalavich writes that the RevenueShares Small Cap Fund (RWJ) outperformed the S&P 600 by 24 percentage points for the year through September 30.
As the gap between revenue-weighting and market-cap weighting is growing, revenue appears to be a better way to pick stocks in an economic recovery.
Revenue weighting appears to also be working for mid-cap ETFs and large-cap ETFs as well. Yesalavich points out that the RevenueShares Mid Cap Fund (RWX) has outpaced the S&P 400 by 14 percentage points and the RevenueShares Large Cap Fund (RWL) is besting the S&P 500 by 4 percentage points year to date.
