ETF Trends
ETF Trends

Middle-capitalization stocks are outperforming this year, and investors can also target the mid-cap segment through related exchange traded funds.

Mid-cap companies are slightly more diversified than their small-cap peers, which allows many mid-sized companies to generate more consistent revenue and cash flow and provide more stable stock prices. Additionally, they are not so big that their size would slow down growth.

The mid-caps segment has also outperformed their large-cap peers, but with lower volatility than small caps. Moreover, the returns of mid-cap stocks have also beaten those of small-cap stocks during the trailing three-, five-, and 10-year periods, with lower volatility.

Related: An Attractive Mid-Cap Value ETF Play

Well-known mid-cap ETFs include the iShares Core S&P Mid-Cap ETF (NYSEArca: IJH), SPDR S&P MidCap 400 ETF (NYSEArca: MDY) and the Vanguard Mid-Cap ETF (NYSEArca: VO), among others.

“Being smack in the middle can be hard. And maybe when it comes to stocks in the middle, the S&P 400 midcap index doesn’t get as much attention as its large- and small-cap counterparts, the S&P 500 and the Russell 2000,” reports CNBC. “But on Tuesday, the midcap index hit an all-time high, having already seen a 13 percent rise this year, and could see further upside due to several fundamental and technical forces.”

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Related: Dividend Growth ETFs Could Be a Better Way to Play Small-, Mid-Caps

Moreover, middle-capitalization stocks may offer a suitable middle ground between more volatile small-caps and less mobile large-caps. Mid-cap companies are slightly more diversified than their small-cap peers, which allows many of the companies to generate more consistent revenue and cash flow and provide more stable stock prices. Additionally, they are not so big that their size would slow down growth. Consequently, mid-caps have generated historically higher returns than large-caps, with higher volatility and higher beta, but at a lower ratio of return-to-risk than small-caps.

“S&P Global defines midcap stocks as generally being “quite dynamic and not so large that continued growth is unattainable,” distinct from large- and small-cap companies. The index’s median market cap, according to S&P data, is about $3.57 billion,” adds CNBC.

For more information on mid-caps, visit our mid-cap category.

SPDR S&P MidCap 400 ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.