iShares Micro-Cap ETF

IWC

Market cap $1.41B

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.

IWC has sharply lagged the S&P 500 in the past three years. Its valuation is compelling, but we must see confirmation from the chart before a bullish view can hold water. I outline key price levels to monitor ahead of weak calendar trends.

The iShares Micro-Cap ETF seeks to track the results of the Russell Microcap Index. Most securities included in IWC have a market cap between $50,000,000 and $300,000,000. The appeal of most small-cap ETFs should be the opportunity for significantly higher gains because of the added risks associated with investing in smaller companies. IWC's structure prevents it from capitalizing on significant gains long term, as successful companies will likely outgrow the micro-cap space.