Mid Cap Growth Style 1Q17: Best and Worst

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The Mid Cap Growth style ranks eleventh out of the twelve fund styles as detailed in our 1Q17 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Mid Cap Growth style ranked eighth. It gets our Dangerous rating, which is based on an aggregation of ratings of 9 ETFs and 354 mutual funds in the Mid Cap Growth style as of January 31, 2017. See a recap of our 4Q16 Style Ratings here.

Figure 1 ranks from best to worst the six Mid-Cap Growth ETFs that meet our liquidity minimums and Figure 2 shows the five best and worst-rated Mid-Cap Growth mutual funds. Not all Mid Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 457). This variation creates drastically different investment implications and, therefore, ratings.

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

Here is our ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings. 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 – Top 5

midcapgrowth_figure1* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

PowerShares Russell Midcap Pure Growth Portfolio (PXMG), PowerShares DWA Nasdaq Momentum Portfolio (DWAQ), and First Trust Mid Cap Growth AlphaDEX (FNY) 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

midcapgrowth_figure2* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

AMG Managers Montag & Caldwell Mid Cap Growth Fund (AMCMX, AMMCX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Barron’s 400 ETF (BFOR) is the top-rated Mid Cap Growth ETF and AMG Managers Cadence Mid Cap Fund (MCMAX) is the top-rated Mid Cap Growth mutual fund. BFOR earns an Attractive rating and MCMAX earns a Very Attractive rating.

State Street SPDR S&P 400 Mid Cap Growth (MDYG) is the worst rated Mid Cap Growth ETF and Harbor Mid Cap Growth Fund (HNMGX) is the worst rated Mid Cap Growth mutual fund. MDYG earns a Neutral rating and HNMGX earns a Very Dangerous 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

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

Figure 3: Separating the Best ETFs From the Worst Funds

midcapgrowth1q17_figure3

Sources: New Constructs, LLC and company filings

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

midcapgrowth1q17_figure4

Sources: New Constructs, LLC and company filings

This article originally published here on February 1, 2017.

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

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