With no shortage of ETFs offering exposure to mid-cap stocks,
investors face a dizzying array of choices. However, not all
mid-cap funds are the same - a theme highlighted by S&P
Capital IQ in a recent research note.
Mid-caps outperformed their large-cap rivals in 2010, but have
lagged large-caps last year and in the first half of 2012. Even
so, the SPDR S&P MidCap 400 ETF (NYSE:
) and the Vanguard Mid-Cap ETF (NYSE:
) have logged year-to-date gains of around 9.6 percent and 8.9
percent, respectively. S&P rates both funds Marketweight.
"One of the most prominent differences in these two ETFs'
holdings is the breakdown in the size of the constituent
companies - both are billed as mid-cap plays, but VO has a
greater slant towards larger-cap companies, with a weighted
average market cap of $7.2 billion among its holdings, compared
to a significantly lower $3.9 billion for MDY," S&P said in
MDY, which charges 0.25 percent per year in fees, is home to
401 stocks and $9.64 billion in assets under management (AUM). VO
charges just 0.1 percent and held 464 stocks at the end of May.
The ETF had $3.57 billion in AUM at the end of June, according to
data from the ETF Industry Association. MDY has beaten VO over
the past five years.
"We think MDY has benefited from being relatively light
compared to VO in the Energy sector (5.3% exposure vs. 8.1%),
which was the worst-performing sector in the S&P MidCap 400
Index average this year," S&P said in the note. "VO,
meanwhile, has been helped by its relatively larger holdings in
Consumer Discretionary and Consumer Staples (17.8% and 5.4%
respectively, vs. 13.7% and 4.2% for MDY), which have done
relatively well thus far in 2012. While that is the past, it is
notable that MDY has greater exposure to the Industrials sector,
where S&P Capital IQ equity analysts have a number of Buy
recommendations on mid-cap companies."
VO's largest sector allocation is consumer discretionary. That
sector accounts for around 18.8 percent of the fund's weight.
Financials check in at close to 18 percent, while technology and
industrial names account for approximately 14.7 percent and 12.5
percent of the fund's weight, respectively.
VO's top-10 holdings including Ross Stores (NASDAQ:
), Chipotle Mexican Grill (NYSE:
), Vertex Pharmaceuticals (NASDAQ:
) and Dollar Tree (NASDAQ:
MDY features an allocation north of 22 percent to finanicals
and a 16.1 percent weight to industrials. Technology, consumer
discretionary and health care stocks also receive double-digit
allocations in the ETF. MDY's top-10 holdings include Vertex,
Regeneron Pharmaceuticals (NASDAQ:
), HollyFrontier (NYSE:
), Kansas City Southern (NYSE:
) and PetSmart (NASDAQ:
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