More Overlooked Mid-Cap ETFs
Not quite as familiar as large-caps and often viewed as less sexy than small-caps, mid-cap stocks still offer plenty of opportunity. The proof is in the proverbial pudding. The SPDR S&P 500 (NYSE: SPY) is up 19.5 percent year-to-date, but that lags the returns offered by the Vanguard Mid-Cap ETF (NYSE: VO), the iShares Core Mid-Cap ETF (NYSE: IJH) and the SPDR S&P MidCap 400 ETF (NYSE: MDY).
Those three funds are among the dominant names in mid-cap ETFs, but they are far from the only products in this cap genre worth considering. Just as many mid-cap stocks go overlooked, the same can be said of some mid-cap ETFs that have been solid performers this year.
PowerShares S&P MidCap Low Volatility Portfolio (NYSE: XMLV)
Conservative investors have embraced low volatility large-cap ETFs in a big way, helping make the PowerShares S&P 500 Low Volatility Portfolio (NYSE: SPLV) one of the most successful ETFs of any stripe to debut over the past two years.
SPLV has small- and mid-cap cousins that came to market in February and the mid-cap play is the PowerShares S&P MidCap Low Volatility Portfolio. XMLV operates in similar fashion to SPLV in that the mid-cap fund’s holdings are culled from the 20 percent of an index’s constituency with the lowest trailing 12-month volatility. XMLV’s 80 holdings come by way of the S&P MidCap 400 Index.
The new mid-cap offering devotes nearly 77 percent of its combined weight to financial services and utilities names. Investors should also note small-cap growth and value names comprise a quarter of the fund’s weight, according to PowerShares data. XMLV has annual fees of 0.25 percent and is up nearly 10 percent year-to-date.
WisdomTree International MidCap Dividend Fund (NYSE: DIM)
The WisdomTree International MidCap Dividend Fund can help investors kill three birds with one stone: Mid-cap and international exposure with a dividend kicker. Given the current market environment with U.S. stocks looking significantly more attractive than most other major developed markets, investors need to evaluate the pros and cons of this ETF.
DIM does have a 3.1 percent 30-day SEC yield and Japan and is 19 percent of the fund’s country weight. However, DIM is not a currency hedged ETF, leaving it vulnerable to a rising yen. The U.K., the next best developed dividend market in dollar terms after the U.S., is DIM’s second-largest country weight at 15.6 percent.
Overall, nearly half of the 21 countries DIM offers exposure are Eurozone members. That levers the ETF to a possible rebound in that region, but also the possibility of further economic retrenchment. Annual fee: 0.58 percent.
iShares Russell Mid-Cap Value ETF (NYSE: IWS)
The iShares Russell Mid-Cap Value ETF is by no means a small ETF. Nearly $5.2 billion in assets under management affirms as much, but IWS is not the most talked about ETF. The most recent coverage of IWS includes one analyst calling the ETF “dangerous.” If year-to-date returns of over 18 percent are “dangerous” then what are one-year returns of 30.5 percent? Sort of safe?
Fact: IWS is favorably exposed to two of this year’s top-performing sectors. Financial services combine for 33.7 percent of the ETF’s weight. Combine producer durables and discretionary names and consumer discretionary represents another 21 percent.
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