It’s easy to only focus on the major companies when investing, to get pulled into growth or value seeking within large-cap companies, or to search out the next up-and-comers among small-caps. Too often, the middle ground gets forgotten, but often that’s where the sweet spot can lie, and one analyst believes that this seems to be the case right now.
Andrew Addison, author of “The Institutional View,” a research-driven technical analysis product for institutional investors, and former director of technical analysis for Fidelity’s institutional asset management division, believes that mid-caps are poised for growth.
In an article for Barron’s, Addison details several technical reasons why mid-caps are a good investment right now. When analyzing the S&P 400 Mid Cap Index, he compared the moving averages of the stocks and the percentage that were higher compared to the price trend of the index. He found that the number of stocks trading above their 10-week moving average was stronger than the overall index.
Image source: Barron’s ’It’s Time to Bet on Mid-Cap Stocks’
Between June and September, the index experienced a dip, but the stocks that were trending above their moving averages logged higher lows than the overall index did. Addison stated, “this bullish divergence projects that it is only a matter of time until the Index breaks out of its trading range.”
Addison also analyzed the price range of the securities within the Mid Cap Index and found that the securities experienced a collective consolidation beginning in April.
“This compression in volatility projects that a sharp price move is directly on the horizon,” Addison wrote, going on explain that once the mid-caps closed above a particular threshold, they would experience strong and rapid growth.
American Century Offers Mid-Cap Investment
The American Century Mid Cap Growth Impact ETF (MID) invests in companies that are actively working across a broad spectrum of ESG principles, including clean energy and solar. MID is an actively managed fund that seeks to invest in mid-cap companies that exhibit growth through an ESG lens.
Using the United Nations Sustainable Developmental Goals (SDG), which include issues such as affordable and clean energy, decent work and economic growth, industry, innovation, infrastructure, and responsible consumption and production, the portfolio managers assign each security an impact thesis based on its fundamental growth profile and current or projected SDG alignment.
By utilizing third-party mapping tools, frameworks that are provided by sustainable investing platforms, or internal research, the impact thesis is created. In order to avoid impact washing (when companies aren’t actually following SDG but give the impression they are), the highest emphasis is placed on the impact created by the product or service that the company produces. Companies can align on more than one SDG, and the fund doesn’t prioritize one SDG over another.
MID uses the market caps from the Russell Mid-Cap Growth Index, which are companies between $677 million to $46 billion, and is a non-diversified fund.
As an actively managed fund, MID is semi-transparent and publishes a proxy portfolio daily. The ETF carries an expense ratio of 0.45%.
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