RIA Ideas - Value Shopping

Vinay Tolia |
Categories
Weekly Market Commentary

 

Growth Note · IWM / IWN

Small caps won this year. They're still priced like they didn't.

Small caps beat the S&P by eight points this year and still trade at lower multiples: IWM at 18.6x and small-cap value (IWN) at 14.9x, against 25.9x for SPY (Yahoo Finance, 8/18/2026).

The discount survived the rally because the estimates keep climbing. Russell 2000 earnings are forecast up 45% next year against 12% for the S&P (Goldman Sachs, 8/16/2026).

Winning, Cheaper, And Growing Faster

Year to date IWN up 23.5 percent, IWM up 21.2 percent, SPY up 12.9 percent; trailing P/E of 14.9 for IWN, 18.6 for IWM, 25.9 for SPY; and expected earnings growth of 37 versus 32 percent for 2026 and 45 versus 12 percent for 2027

Data: Yahoo Finance as of 8/18/2026; earnings estimates Goldman Sachs as of 8/16/2026 · marinelayeradvisors.com/insights

5-Year Growth Note

IWM (Russell 2000)

Upside participation

115% of IWM's gain, no cap

Downside protection

70% barrier at maturity

 

5-Year Growth Note

Worst-of IWM / IWN (adds small-cap value)

Upside participation

135% of the worst performer, no cap

Downside protection

70% barrier at maturity

Both may return principal in full if the underlier finishes at or above 70% of its starting level. Below that barrier the investor may participate in the full decline from the initial level, so a 40% fall may mean a 40% loss. Adding the value sleeve may raise participation by 20 points because the payoff then tracks whichever of the two performs worse.

Indicative levels only.

Payoff diagram: 135 percent participation on the worst of IWM and IWN, or 115 percent on IWM alone, principal returned down to minus 30 percent, and below the 70 percent barrier the full loss from the initial level

Want to see more thematic trades for your customers?

This material is for informational purposes only and does not constitute a recommendation. Data sourced from Yahoo Finance as of 8/18/2026 and Goldman Sachs as of 8/16/2026 and has not been independently verified. Earnings growth figures are analyst estimates and are subject to revision. Past performance is not indicative of future results. Structured notes involve risks including potential loss of principal. These notes provide contingent principal protection only: if the underlier (or, for the basket, the worst performer) closes below 70% of its initial level at maturity, the investor is exposed to the full decline from the initial level. Terms shown are indicative and subject to final pricing at trade. Structured note pricing is subject to issuer credit risk, market conditions, and availability at time of execution.