Best And Worst Q2 2018: Mid Cap Value ETFs And Mutual Funds

|
Includes: HWMAX, ONEY, PMVQX, PXMV
by: David Trainer

Summary

The Mid Cap Value style ranks ninth in Q2'18.

Based on an aggregation of ratings of nine ETFs and 171 mutual funds.

ONEY is our top-rated Mid Cap Value ETF, and PMVQX is our top-rated Mid Cap Value mutual fund.

The Mid Cap Value style ranks ninth out of the twelve fund styles as detailed in our Q2'18 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Mid Cap Value style ranked eighth. It gets our Neutral rating, which is based on an aggregation of ratings of nine ETFs and 171 mutual funds in the Mid Cap Value style. See a recap of our Q1'18 Style Ratings here.

Figures 1 and 2 show the best and worst-rated ETFs and mutual funds in the style. Not all Mid Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 19 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.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

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

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 (MUTF: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 Prudential QMA Mid Cap Value Fund (PMVQX) is the top-rated Mid Cap Value mutual fund. Both earn an Attractive rating.

PowerShares Russell Mid Cap Pure Value Portfolio (PXMV) is the worst rated Mid Cap Value ETF and Hotchkis & Wiley Mid Cap Value Fund (HWMAX) is the worst rated Mid Cap Value mutual fund. PXMV earns an Unattractive rating and HWMAX 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. Don’t just take our word for it. See what Barron’s says on this matter.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors, and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

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

Sources: New Constructs, LLC and company filings

This article originally published on April 24, 2018.

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] Ernst & Young’s recent white paper “Getting ROIC Right” proves the superiority of our holdings research and analytics.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.