The Best of Both Worlds: Magical Mid Caps and the RFV ETF

The rotation from growth to value can be seen across the spectrum of equities, and not just in large caps. ETF investors can get a mid cap tilt to value with the Invesco S&P MidCap 400 Pure Value ETF (RFV).

RFV, which is up 25% year-to-date, seeks to track the investment results of the S&P MidCap 400® Pure Value Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.

The underlying index is composed of a subset of securities from the S&P MidCap 400® Index that exhibit strong value characteristics. RFV’s expense ratio comes in at 0.35%, which is right around the category average.

“This ETF is one of several options available to investors looking to access mid cap U.S. stocks exhibiting value characteristics, such as high dividend yields and low pricing multiples,” an ETF Database analysis noted. “As such, RFV may be a useful tool for those looking to implement a tactical tilt towards a sector of the U.S. equity market that may perform relatively well in certain economic environments.”

“It is probably too targeted for those looking to build a long-term, buy-and-hold portfolio, though it can potentially be useful for fine-tuning exposure offered by other ETFs,” the analysis suggested. “RFV is noteworthy because of the “pure style” distinction offered; this product is very different from funds like IJJ and IWS, which often have considerable overlap with their growth counterparts.”

RFV Chart

Poised to Outperform

The Russell Midcap index is up 90% the past year and 8% year-to-date. Mid caps can capture upside growth in a healing economy, which should help boost RFV even further.

“Midcap and smallcap space has the potential to outperform over the next three years,” an article noted in The Economic Times. “Smallcap has outperformed mid and large cap in a big way. That thesis will continue because we find value in the smallcap and midcap space.”

“So, for the next three years, if the global thesis continues to move towards value as compared to growth, the outperformance of smallcaps and midcaps will continue,” the article added. “It will be premature to quantify in terms of percentage but if you are a medium to long term perspective investor, a significantly large exposure should be there in this space as a strategy for the next three years.”

^RMC Chart

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