Mid Cap Value Style 2Q19: Best and Worst

The Mid Cap Value style ranks eighth out of the twelve fund styles as detailed in our 2Q19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Mid Cap Value style ranked eighth as well. It gets our Neutral rating, which is based on an aggregation of ratings of 10 ETFs and 184 mutual funds in the Mid Cap Value style as of April 23, 2019.

Figure 1 ranks from best to worst the eight Mid Cap Value ETFs that meet our liquidity standards and Figure 2 shows the five best and worst rated Mid Cap Value mutual funds. Not all Mid Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 23 to 2076). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Mid Cap Value style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best & Worst Ratings

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Principal Contrarian Value Index ETF (PVAL) and First Trust Multi Cap Value AlphaDEX Fund (FAB) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Fidelity Mid Cap Value K6 Fund (FCMVX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

State Street SPDR Russell 1000 Yield Focus ETF (ONEY) is the top-rated Mid Cap Value ETF and Fidelity Advisor Mid Cap Value Fund (FIDFX) is the top-rated Mid Cap Value mutual fund. ONEY earns an Attractive rating and FIDFX earns a Very Attractive rating.

iShares Russell Mid Cap Value ETF (IWS) is the worst rated Mid Cap Value ETF and Gabelli Focus Five Fund (GWSAX) is the worst rated Mid Cap Value mutual fund. IWS earns an Unattractive rating and GWSAW earns a Very Unattractive rating.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Figures 3 and 4 show the rating landscape of all Mid Cap Value ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Funds