MDY: Well-Diversified, Solid Mid-Cap ETF, But Quality Is Suspect

Summary

• MDY is a well-established, well-diversified mid-cap blend ETF with $17.3 billion in assets under management and a 0.23% expense ratio. This article evaluates MDY against three S&P MidCap 400 alternatives.
• The goal is to identify whether MDY's plain-vanilla strategy is superior to ETFs using revenue, GARP, or multi-factor strategies and weighting schemes. I discovered some pros and cons to consider.
• MDY is reasonably low-risk, evidenced by its lower five-year beta and strong diversification. Shareholders would benefit from a secular change, as mid-caps have underperformed large-caps in the last 8-10 years.
• The main negative is quality. In a peer group of 19, MDY's profit score was only ninth-best. Not surprisingly, the best-performing mid-cap blend ETF in the last four years also has the highest profit score, so it is a factor to consider.
• Overall, I didn't find too many faults with MDY, but believe there are better choices. Therefore, I rate it as a solid "hold".

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Investment Thesis

This article evaluates the SPDR S&P MidCap 400 ETF (NYSEARCA:MDY) as a suitable long-term investment by analyzing its performance and fundamentals against three alternatives, as follows:

• Invesco S&P MidCap 400 Revenue ETF (RWK)
• Invesco S&P MidCap 400 GARP

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SPY, MSFT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.