Sometimes, it pays to "think small"... That might sound contradictory to popular advice about always dreaming big. And of course, it's human nature to shoot for the stars with almost everything in life.

Some Tiny Funds Have a Secret Advantage By Marc Gerstein, director of research, Chaikin Analytics Sometimes, it pays to "think small"... That might sound contradictory to popular advice about always dreaming big. And of course, it's human nature to shoot for the stars with almost everything in life. But when it comes to assets under management ("AUM"), it's great to have an open mind... For example, as I discussed last Friday, the tiny Royce Quant Small-Cap Quality Value Fund (SQLV) employs a better value strategy than its larger peers. An exchange-traded fund ("ETF") that doesn't insist on raising billions in AUM can be creative. It doesn't need to worry that unusual strategies will turn off prospective investors. However, many investors treat small ETFs like SQLV as if they're "penny stocks." They worry that shares will be hard to trade or that liquidity might even dry up altogether. Today, I'll explore that idea using a case study. And as we'll see, it's simply not true...   Recommended Links: "My Most Urgent Warning Yet" A few months ago, Marc Chaikin issued a dire warning for U.S. stocks. Almost like clockwork, we suffered the worst selloff in half a century. Now, he says we're about to witness a new historic shift that could soon create and destroy fortunes, starting before the end of 2022. Click here to get his urgent message. Follow The Money! Rare Earths FAR BIGGER Than Oil & Gold... The largest, most cash-gushing companies around the world are in desperate demand for rare earth materials. Meanwhile, the U.S. government is doing everything within its power to move back to independence... by rebuilding a once-dominant, domestic rare earth industry... and now committing nearly $1 TRILLION in funding. But time is quickly running out to take advantage. Here's why this could be the absolute best bear market investment today. I'm focusing on the Valkyrie Balance Sheet Opportunities Fund (VBB). Its AUM is only about $0.6 million. In a world of billion-dollar companies, that's microscopic. The ETF's prospectus notes that it seeks to invest in "operating companies that directly or indirectly invest in, transact in, or otherwise have exposure to bitcoin (such as bitcoin custodians, exchanges or traders)." And these investments can include "companies that hold or transact in relatively small amounts of bitcoin." Frankly, this ETF isn't my cup of tea. And given its history, the Power Gauge doesn't rank it. So I'm not writing this essay to express any opinion on its merits as an investment. Instead, I just want to focus on whether folks who like VBB can effectively trade its shares. We'll start with an important distinction between shares of ETFs and regular companies... ETF shares issued on day one aren't increased by secondary offerings every now and then. And they aren't repurchased like a company's stock. Rather, a complex exchange mechanism involving "authorized participants" ("APs") creates and eliminates ETF shares every day. I won't go too deeply into the weeds. Just know that APs provide baskets of stocks that line up with the ETF's portfolio. In exchange, they receive "creation units." APs also can offer cash and receive stock baskets. In the end, if you place an order to trade VBB shares... it will get filled. The other party might be another investor. Or your order might get filled as a result of the APs' activities. Here's the important point... VBB's liquidity isn't based on the ETF only having about $0.6 million in AUM. Instead, it's based on how the APs can trade the stocks within the portfolio. And most of the stocks in VBB's portfolio have market capitalizations well into the billions. Some of its biggest holdings include Tesla (TSLA), BlackRock (BLK), and Mastercard (MA). APs can trade all of those stocks more quickly than humans can blink an eye. Now, VBB also invests in some microcaps. The smallest is BTCS (BTCS), with around $21 million in market cap. And Banxa Holdings' (BNXAF) market cap is roughly $31 million. But importantly, BTCS and Banxa aren't illiquid penny stocks... For example, the dollar value of VBB's position in BTCS amounts to 12.5% of the three-month average dollar value of shares traded (volume times share price). That would take longer than the blink of an eye to sell. But it's doable. And many ETFs hold positions like that... The giant iShares Russell 2000 Fund (IWM) has roughly $69.1 billion in AUM. And it has similar ratios in holdings like Cryptyde (TYDE) at 12%, VistaGen Therapeutics (VTGN) at 24%, and Loyalty Ventures (LYLT) at 33%. The Banxa position within VBB requires a more delicate trading hand. Its stake is 154% of the three-month average dollar value of shares traded. But even that isn't unique... The same ratio for iShares Russell 2000 Fund's stake in Viant Technology (DSP) is 213%. Because VBB is so tiny, Valkyrie could decide it's not worthwhile to keep operating it. If that were to happen, the ETF manager would simply notify its investors and sell all its positions. You wouldn't lose your remaining stake in the ETF. The cash value of your stake would show up in your brokerage account and be labeled as if you had placed a sell order yourself. The bottom line is simple... Don't let small AUM stop you from investing in an ETF whose strategy interests you. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral     Bearish Dow 30 -0.57% 2 23 5 S&P 500 -0.67% 98 282 117 Nasdaq -0.99% 15 57 28 Small Caps -0.96% 426 972 450 Bonds -0.83% Energy +1.51% 15 5 0 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks have turned somewhat Bearish. Major indexes are mixed. *  *  *  * Top Movers Gainers FANG +3.98% CAH +3.09% APA +2.94% HAL +2.57% SLB +2.44% Losers CTLT -7.44% BMY -6.24% CF -4.23% JBHT -3.79% TTWO -3.58% *  *  *  * Earnings Report Reporting Today Rating Before Open After Close BBY HPQ, PVH No earnings reporting today. Earnings Surprises CTLT Catalent, Inc. Q4 $1.19 Beat by $0.04 HEI HEICO Corporation Q3 $0.62 Met estimate *  *  *  * Sector Tracker Sector movement over the last 5 days Energy +6.03% Materials -0.37% Utilities -0.91% Industrials -1.93% Financial -2.14% Communication -2.34% Staples -2.39% Discretionary -2.49% Real Estate -2.61% Health Care -3.64% Information Technology -4.13% *  *  *  * Industry Focus Mining Services 12 11 10 Over the past 6 months, the Mining subsector (XME) has outperformed the S&P 500 by +6.09%. Its Power Bar ratio, which measures future potential, is Strong, with more Bullish than Bearish stocks. It is currently ranked #8 of 21 subsectors and has moved up 4 slots over the past week. Top Stocks CEIX CONSOL Energy Inc. ARCH Arch Resources, Inc. BTU Peabody Energy Corpo *  *  *  * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, click here. You're receiving this e-mail at its028@gmail.com. For questions about your account or to speak with customer service, call +1 (877) 697-6783 (U.S.), 9 a.m. - 5 p.m. Eastern time or e-mail info@chaikinanalytics.com. Please note: The law prohibits us from giving personalized investment advice. © 2022 Chaikin Analytics, LLC. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Chaikin Analytics, LLC. 201 King Of Prussia Rd., Suite 650, Radnor, PA 19087. www.chaikinanalytics.com. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Chaikin Analytics, LLC, does not recommend or endorse any brokers, dealers, or investment advisors. Chaikin Analytics forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Chaikin Analytics, LLC (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.