With large-caps leading U.S. markets higher this year, some smaller stocks are lagging. However, not all mid-cap exchange traded funds are off the pace. For example, the Guggenheim Mid-Cap Core ETF (NYSEArca: CZA) is higher by more than 13% and hit an all-time high on Wednesday.
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.
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.
CZA tracks the Zacks Mid-Cap Core Index, which “uses quantitative methodologies to identify a group of securities that have the potential to outperform indices such as the Russell Midcap Index or the S&P MidCap 400 Index, from a universe of mid-capitalization securities, including master limited partnerships (“MLPs”) and American depositary receipts (ADRs”),” according to Guggenheim.
The ETF, which debuted over a decade ago, holds 100 stocks. CZA’s largest holding commands just 2.2% of the fund’s weight. The ETF’s sector lineup implies a value tilt.
Related: Mid-Cap ETFs: Not Too Big, Not Too Small, But Just Right
Value stocks typically trade at cheaper prices relative to fundamental measures of value, such as earnings and the book value of assets. In contrast, growth stocks tend to run at higher valuations since investors expect the rapid growth in those company measures.
Financial services stocks, one sector that is widely viewed as attractively valued, account for 29.6% of CZA’s roster. The utilities and industrial sectors combine for almost 32% while CZA sports lower allocations to consumer staples and healthcare, sectors that are not currently viewed as inexpensive.
CZA has $197.1 million in assets under management and charges 0.65% per year, or $65 on a $10,000 investment. The ETF has a five-star rating from Morningstar.
For more information on mid-caps, visit our mid-cap category.