A Mid-Cap ETF to Run with the Bulls | ETF Trends

Big or small, equities are having a blast amid this vaccine rally. Yet you can’t forget medium-sized companies, which are on their own bull run with ETFs like the Direxion Daily Mid Cap Bull 3X Shares (MIDU) pushing higher.

MIDU seeks daily investment results, before fees and expenses, of 300% of the daily performance of the S&P MidCap® 400 Index. The funds is up 34% the past month, feeding off strength from a vaccine rally-filled November.

The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, exchange-traded funds (“ETFs”) that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index measures the performance of 400 mid-sized companies in the United States.

MIDU Chart

For Mid-Cap Stocks, Falling in the Middle Pays Handsomely

ETF investors are quickly discovering just how profitable falling in the middle of the road can be. A MarketWatch article captures that sentiment perfectly:

“This year certainly has thrown its fair share of curveballs,” the article said. “And one unusual factor in the stock market this year has been the rise of ‘Goldilocks’ midcap stocks that are neither too big nor too small to succeed in this fast-changing environment. Consider that the Russell 2000 index of midsize U.S. corporations tallied its sixth record close of 2020 right after Thanksgiving, topping off a 15% surge since Election Day. But even more impressive is how this midcap index has diverged from the S&P 500 over a slightly longer horizon; the Russell 2000 is up about 18% since Sept. 1 while the large-cap S&P is up only about 3%.”

What is exactly feeding into this mid-cap market strength?

“Well, many large companies simply cannot respond fast enough in a challenging market environment. When you command multinational operations with thousands of employees, change takes time,” the article said further. “On the other hand, small-cap companies can be agile but tend to operate with little margin for error. Big and well-capitalized firms may simply see their shares drift lower, but small firms risk going under during a prolonged crisis.”

“In between those two words lie midcap stocks like those that make up the Russell 2000,” the article continued. “Valued at around $2 billion to $10 billion, these ‘Goldilocks’ stocks that are neither too big nor too small. The following five stocks all show in different ways how this middle road of midcaps could be your best bet in this market environment.”

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