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Don't Overlook Mid-Cap Stocks

by
December 11, 2014 6:14 pm
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With such an abundance of investments options available today, it is easy to overlook certain securities and even an entire asset class. A majority of the buzz lately has been over large-cap stocks outperforming and small-cap stocks lagging. This leads to a large number of investors overlooking the players that fall in the middle: mid-cap stocks.

Stocks with a market capitalization between $2 and $10 billion fall into the mid-cap asset class. Despite being widely popular, the Vanguard Small-Cap Index Fund (NYSE: VB) has underperformed its mid-cap peers by 7 percent year-to-date.

Large-cap stocks are generally viewed as the safest option, as small-caps are considered to carry above-average risk. Mid-cap stocks typically fall in the middle range, with the potential of higher sales-growth than smaller companies can provide, while eliminating some of the risk associated with infancy stage companies.

Some mid-cap ETFs to consider when looking to gain exposure to the asset class are listed below.

Related Link: Top 4 Mid-Cap Stocks In The Lodging Industry With The Highest ROI

Vanguard Mid-Cap

The Vanguard Mid-Cap ETF (NYSE: VO) follows 369 mid-cap companies, which are characterized by having a market cap of between $2 and $10 billion. The ETF is distributed across 10 industries, with financials and industrials making up 34 percent of the portfolio.

The top individual holdings include:

  • Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) at 0.8 percent
  • Health Care REIT, Inc. (NYSE: HCN) making up 0.7 percent
  • Avago Technologies Ltd (NASDAQ: AVGO) coming in at 0.7 percent as well

VO is up 11.5 percent year-to-date and 5 percent over the last six months. It has a low expense ratio of 0.09 percent.

iShares Russell Mid-Cap

The iShares Russell Midcap Index Fund (NYSE: IWR) is made up of 841 mid-cap stocks across 11 sectors with, financials and consumer discretionary making up 38 percent.

The top holdings include:

  • The Kroger Co. (NYSE: KR) with a 0.48 percent holding
  • Applied Materials, Inc. (NASDAQ: AMAT) at 0.46 percent
  • Aon Plc (NYSE: AON) at 0.45 percent

IWR is up 9.7 percent year-to-date and 3 percent over the last six months. The mid-cap ETF has an expense ratio of 0.20 percent.

RevenueShares Mid Cap

The RevenueShares Mid Cap Fund (ETF) (NYSE: RWK) consists of 400 publicly traded companies that are classified as being mid-cap stocks. The holdings are distributed across 10 sectors with consumer cyclical and consumer non-cyclical accounting for 43 percent of the ETF.

The top individual holdings include:

  • SPDR S&P MidCap 400 ETF (NYSE: MDY) at 3.3 percent
  • Ingram Micro Inc (NYSE: IM) with a 3.2 percent holding
  • World Fuel Services Corp (NYSE: INT) coming in at 2.9 percent

RWK is up 5.8 percent year-to-date and up 0.14 percent over the last six months. The ETF has an expense ratio of 0.54 percent.

It is important to note that even though the mid-cap stocks have outperformed their smaller counterparts in 2014, there is no guarantee next year will bring the same results. While recognizing the transition between the different asset classes is important to outperforming the overall market, it is also important to have access to a broad range of asset classes to minimize risk and increase diversity.


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