Exchange Traded Funds (ETFs)

ETF Talk: This Fund Offers a Middle Ground for Growth

While large-cap stocks are often seen as more consistent and safer, and small-cap stocks have the best potential for growth if an investor chooses the right one, a middle ground can allow investors to use both of these elements in their portfolio at once.

The iShares Morningstar Mid-Cap Growth ETF (IMCG) is one investment that plays into such a strategy. This fund focuses on domestic mid-cap stocks whose earnings are expected to grow at an above-average rate relative to the market.

Growth stocks typically focus on returns over dividends and possess the power to propel top- and bottom-line revenues. This fund holds $1.4 billion in assets and has strong liquidity characteristics.

IMCG holds upwards of 300 stocks in total. Its 0.83% yield is not surprising given its strategy, but easily wipes out the low 0.06% expense ratio and leaves investors with some cash.

During the last 12 months, the fund’s performance is approximately in line with the S&P, posting a loss of 6.6%. However, it has been trending upward for most of the current year.

Chart courtesy of www.StockCharts.com

Top holdings include MSCI Inc. (MSCI), 1.10%; Block Inc. (SQ), 1.01%; Arthur J. Gallagher & Co. (AJG), 1.01%; IDEXX Laboratories (IDXX), 1.01%; and Ross Stories Inc. (ROST), 1.00%. As these figures demonstrate, the distribution of fund holdings is relatively even, as no one or handful of companies compose an outsized proportion of IMCG’s holdings. The top ten holdings make up only 9.64% of assets.

The fund’s greatest sector weighting lies in technology at 24%, followed by industrials, 19%, and health care, 12%. Traditionally stable sectors such as utilities and energy are the least prevalent, which makes sense given the fund’s tilt towards growth stocks.

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For investors looking to tap into mid-cap growth stocks, judging by its impressive assets under management, iShares Morningstar Mid-Cap Growth ETF (IMCG) is a popular option.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.