iShares Micro-Cap ETF

IWC

Market cap $1.46B

The $85 billion listing last month of SpaceX, Elon Musk's aerospace, satellite communications and artificial intelligence company, was an important market event. The company's dual-class share structure, conferring disproportionate voting power on its founder, could be expected to serve as a template for the next wave of high-profile IPOs, with OpenAI and Anthropic expected to follow suit in the coming quarters.

Momentum continues to stand out as the dominant equity risk factor since the war with Iran began on Feb. 28. The iShares MSCI USA Momentum Factor ETF has soared more than 32% since the initial attacks on Iran—an extraordinary gain compared with the rest of the field.

Investors searching for the biggest stock winners of 2026 may be surprised to learn they already own some of them through small-cap ETFs.

I rate iShares Micro-Cap ETF (IWC) a buy, viewing it as a high-conviction, tactical role player in my 10-ETF ROAR model portfolio. IWC targets the smallest, often overlooked U.S. equities, offering unique alpha potential and low correlation with large-cap dominated indices. With 1,300 holdings and a 25x trailing P/E, IWC is positioned for outsized returns during speculative market phases, but carries liquidity and volatility risks.

Tiny microcap stocks are starting to deliver huge gains — leaving behind the giants of the S&P 500.

The Middle East crisis led to a broad selloff in Russell equity segments in March halting the year-long rally. 12M forward P/Es derated broadly but more so for Russell 1000, Top 200 and the large- and small-cap Growth indices partly due to their heavy Tech exposure and valuation expansion over the last three years.

I am upgrading iShares Micro-Cap ETF to "Buy," citing low valuation and bullish technicals. IWC trades at a 13.6x P/E with a 12.6% long-term earnings growth rate, offering a compelling GARP profile. Strong price momentum, favorable seasonality, and a breakout above key resistance support a continued uptrend toward a $185 target.

The Invesco S&P 500 High Beta ETF (SPHB) is up a sizzling 27.3% year to date. SPHB targets the stocks in the S&P 500 with the highest sensitivity to market movements, or beta, over the past 12 months.

Micro-cap stocks, which are the lowest rung in the market-cap ladder, are rallying thanks to falling interest rates and comparatively cheaper valuations.

iShares Micro-Cap ETF offers exposure to very small U.S. companies, targeting micro-caps that potentially could be overlooked by passive investors. Only 20% of the top 10 holdings were profitable in 2024, and many exhibit erratic cash flows—not the hallmarks of quality long-term investments. Historical total returns (6.83%) lag significantly behind broader U.S. indices, small-cap, and mid-cap ETFs. Higher fees and high portfolio turnover add additional headwinds.