Mid-cap equities investors are well-aware of the benefits they bring. With an ability to cushion market downturns like a large cap and bring upside growth opportunities like a small-cap, ETFs like the iShares Russell Mid-Cap Value ETF (IWS) can be stellar options.
The sector rotation out of growth-fueled equities like technology and into more value-oriented funds has been well-documented lately, as the number of coronavirus cases starts to rise again. With market uncertainty still permeating, mid-caps can provide an opportunity for ETF investors to straddle the line between growth and value.
IWS gives investors just that by seeking to track the investment results of the Russell Midcap Value Index, which measures the performance of the mid-capitalization value sector of the U.S. equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.
The fund may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index. The price to pay to get in on IWS is a 0.25% expense ratio.
IWS is currently trading below its simple 200-day moving average, but has been above its 50-day average as it continues to recover from a forgettable March. Nonetheless, a V-shaped recovery is well underway and a value-screening option gives investors that quality factor exposure through the rest of 2020 and into 2021.
Overall, IWS gives investors:
- Exposure to mid-sized U.S. companies that are thought to be undervalued by the market relative to comparable companies.
- Targeted access to a specific category of mid-cap domestic stocks.
- Use to tilt your portfolio towards value stocks.
Pop the hood of IWS and you won’t see familiar big tech names like the Apples or the Amazons. You will still get exposure to tech with holdings like Twitter, but, for the most part, you’ll get a mix of industrials, utilities, and consumer discretionary names that should ring a bell–Ford Motor Co for example, which moved upward as of late.
But it all comes back to value. With investors setting up their portfolios for 2021, IWS can provide a value-added opportunity as the rotation continues.
“A positive growth backdrop, closing output gap, and COVID normalization all suggest that [the]value trade has legs,” JP Morgan strategists said in a Business Insider article. “Monday and Tuesday of this week is a perfect warning indicator for what may come in 2021.”
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