Could midcaps be the right call for 2025? Smaller firms appear poised to benefit from rate cuts more than their larger peers. In that scenario, a midcap ETF could offer significant upside, especially in the tax-efficient ETF wrapper. Of course, not all strategies are created equal. A value ETF with a midcap focus, specifically, could identify firms already underrated by the market and poised for a breakout.
See more: Quality Growth ETF QGRO Hits $1 Billion in AUM
The Avantis U.S. Mid Cap Value ETF (AVMV), for example, could provide a powerful tool to play the space entering 2025. With its tax-efficient ETF wrapper, the midcap-focused ETF could appeal as a destination tax-loss-harvested asset. AVMV’s active value approach, however, stands out the most.
The ETF charges just 20 basis points, relatively low for an active fund, to apply a value approach to midcap names. AVMV looks for firms identified as highly profitable via its managers’ fundamental criteria. Its managers assess firms for factors like cash flow, revenue, shares outstanding, and price-to-book value. The fund weights its securities based on those factors as well as overall market cap.
Together, that has helped the fund hit almost $100 million in AUM in just over a year of operation. By focusing on value, it can help investors find those middle-sized firms overlooked by the market already. That approach has helped it return 16.24% YTD, per Avantis Investors data. That has outperformed the fund’s benchmark return of 13.6% in that time. Per ETF Database data, that return also outperformed the fund’s ETF Database Category and FactSet Segment averages.
Investors have plenty of options out there right now, but the rate cut narrative has largely focused on small-caps. Midcaps can provide a third option, and with AVMV’s active value approach, its managers can adapt to events as needed, while closely scrutinizing opportunities with fundamental research.
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