.The Russell 2000 might have a profitability problem.Though the small-cap mark gained 10.1% in July, it's lost approximately 4% so far in August, as of Thursday morning.ALPS' Paul Baiocchi chalks up the unstable transfer to the index's total arrangement, along with an estimation coming from Apollo Global revealing 40% of those firms possess unfavorable revenues." [Financiers] have actually essentially resigned themselves to the simple fact that through remaining in the Russell 2000, I am actually merely going to must take the really good with the poor," the organization's principal ETF strategist informed CNBC's "ETF Edge" this week.To stay clear of the earnings drag, Baiocchi recommends clients focus on premium companies, considering additional particular exchange-traded funds including his organization's mountain range O'Shares united state Small-Cap High Quality Dividend ETF Shares (OUSM)." The concept is high quality firms that pay as well as increase their rewards, as well as significantly, have less dryness than their peers," he stated. "It enables experts and entrepreneurs who have actually seen small limits go sideways for 5 years to become assigned to a type that is actually dragged." Aside from its own earnings display, the fund includes just 107 inventories u00e2 $" a portion of what is actually inside the Russell 2000. Its leading 3 holdings are actually Tradeweb Markets, Juniper Networks as well as Old State International, each sitting at an around 2% weighting in the fund, per FactSet.Shares of the small-cap fund are down 1.5% month to day u00e2 $" exceeding the Russell through much more than 2 amount factors during that time.Disclaimer.