.The Russell 2000 might possess a profitability problem.Though the small-cap index gained 10.1% in July, it is actually dropped approximately 4% up until now in August, as of Thursday morning.ALPS' Paul Baiocchi chalks up the unstable moves to the mark's total composition, along with an estimate coming from Apollo Global revealing 40% of those firms possess bad profits." [Entrepreneurs] have actually basically surrendered on their own to the simple fact that by residing in the Russell 2000, I'm merely mosting likely to must take the excellent with the negative," the firm's chief ETF schemer said to CNBC's "ETF Advantage" this week.To stay clear of the profitability nuisance, Baiocchi proposes entrepreneurs focus on quality providers, considering even more discerning exchange-traded funds including his agency's O'Shares U.S. Small-Cap Top Quality Reward ETF Allotments (OUSM)." The suggestion is actually high quality business that pay for and also expand their dividends, and also notably, have less volatility than their peers," he mentioned. "It makes it possible for consultants and also investors who have found small hats go sideways for 5 years to become designated to a classification that is actually dragged." Aside from its profitability display, the fund has merely 107 inventories u00e2 $" a portion of what's inside the Russell 2000. Its own top three holdings are actually Tradeweb Markets, Juniper Networks and Old Republic International, each sitting at an around 2% weighting in the fund, every FactSet.Shares of the small-cap fund are actually down 1.5% month to date u00e2 $" exceeding the Russell through more than 2 portion points in that time.Disclaimer.