Midcap exchange-traded funds (ETFs) are composed primarily of equity securities of companies whose market capitalizations fall somewhere from $2 billion to $10 billion. As the name implies, midcap companies have market caps greater than those of small caps but less than those of large caps.
The unique appeal that midcaps offer investors is that they are expected to exhibit growth and increase profits, market share, and productivity. They are considered less risky investments than small-caps but more risky than large-caps. An ETF focused on midcap companies provides investors a way to gain diversified exposure to companies still in the middle of their growth curve.
- Midcap equities have underperformed the broad U.S. equity market over the past year.
- The best midcap exchange-traded funds (ETFs) are CZA, JPME, and IMCV.
- The top holding
There are 33 midcap ETFs that trade in the United States, excluding inverse and leveraged funds as well as those with less than $50 million in assets under management (AUM). This list includes ETFs that invest in midcap equities but may not be exclusively or even primarily focused on midcaps.
Midcap stocks, as measured by the S&P MidCap 400 Index, have underperformed the broad U.S. equity market over the 12 months, with a total return of 2.1% compared with the S&P 500’s total return of 9.9%, as of March 17, 2022.
The best-performing midcap ETF based on performance over the past year, is the Invesco Zacks Mid-Cap ETF (CZA).
We examine the three best midcap ETFs below. All numbers are as of March 17, 2022.
Invesco Zacks Mid-Cap ETF (CZA)
- Performance Over One-Year: 13.3%
- Expense Ratio: 0.69%
- Annual Dividend Yield: 1.14%
- Three-Month Average Daily Volume: 5,705
- Assets Under Management: $217.8 million
- Inception Date: April 2, 2007
- Issuer: Invesco
CZA tracks the Zacks Mid-Cap Core Index, an index comprised of mid-cap securities including master limited partnerships (MLPs), American depositary receipts (ADRs) and business development companies (BDCs). Industrials make up the largest portion of the fund's portfolio, followed by health care and utilities securities. CZA holds just over 100 positions and is fairly diversified, with the top 10 holdings accounting for under 20% of invested assets.
The top holdings of CZA include AmerisourceBergen Corp. (ABC), a drug wholesale and distribution company; WEC Energy Group Inc. (WEC), an electricity and natural gas company; and Franco-Nevada Corp. (FNV:TSE), a Canada-based gold royalty and streaming company.
JPMorgan Diversified Return U.S. Mid Cap Equity ETF (JPME)
- Performance Over One-Year: 12.9%
- Expense Ratio: 0.24%
- Annual Dividend Yield: 1.27%
- Three-Month Average Daily Volume: 16,006
- Assets Under Management: $237.0 million
- Inception Date: May 11, 2016
- Issuer: JPMorgan Chase
JPME seeks to track the JP Morgan Diversified Factor US Mid Cap Equity Index, which is comprised of a broad array of U.S. mid-cap stocks. The fund is diversified across sectors, and health care stocks represent the largest portion of the portfolio at 12.4%. Industrials and technology stocks are the sectors receiving the second- and third-largest representation, respectively. The fund utilizes a methodology which includes value, momentum, and quality factors.
The top holdings of JPME include Alcoa Corp. (AA), an industrial producer of aluminum; CF Industries Holdings Inc. (CF), a maker and distributor of fertilizers and related products; and Halliburton Co. (HAL), an oil field service company.
iShares Morningstar Mid-Cap Value ETF (IMCV)
- Performance Over One-Year: 10.1%
- Expense Ratio: 0.06%
- Annual Dividend Yield: 2.54%
- Three-Month Average Daily Volume: 28,694
- Assets Under Management: $503.2 million
- Inception Date: June 28, 2004
- Issuer: Blackrock Financial Management
IMCV targets the Morningstar US Mid Cap Broad Value Index, an index composed of mid-cap U.S. equities that exhibit value characteristics. Financial, industrials, and utilities stocks are the three largest components of the portfolio. IMCV is highly diversified across close to 390 total holdings, with the top 10 positions accounting for under 9% of invested assets.
The top holdings of IMCV include Centene Corp. (CNC), a managed care intermediary company; Archer-Daniels-Midland Co. (ADM), a food processing and commodities company; and McKesson Corp. (MCK), a pharmaceuticals and medical supplies company.
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