Is now the time for midcap investing? The signs are starting to appear. Potential rate cuts from the Fed look to potentially kick-start their year. What’s more, with large-caps so expensive and unavoidable, midcap investing offers opportunities for outperformance and diversification at a discount.
Active ETFs, particularly, could appeal as a way to invest in midcap potential in 2024, as not all midcaps are equal. While some midcap stocks are set to benefit notably from rate cuts, others face tough balance sheets or other issues. Active investing can help sift through them for the most appealing opportunities, with three particular ETFs standing out.
The Avantis U.S. Mid Cap Value ETF (AVMV)
Starting off, AVMV could intrigue. The ETF launched this past November, and charges 20 basis points (bps) for its approach. It uses fundamental screens, looking for factors like cash flow, revenue, outstanding shares, and price-to-book value. That approach has helped the ETF return 14.1% over the last three months.
An active value approach offers something different than a standard midcap approach might. By leaning on strong research capabilities, AVMV could find firms mispriced by the market that could benefit quite a bit from rate cuts.
The American Century Mid Cap Growth Impact (MID)
MID, which charges 45 bps, launched in July 2020. The strategy offers a different spin on midcaps, looking for firms that help the world meet the United Nations Sustainable Development Goals (SDG) and offer a financial return. Those goals include growing clean energy, pushing responsible consumption and product, and pursuing economic growth.
In analyzing each firm’s SDG impact, its managers consider the impact of a firm’s product or services, specifically. In terms of economic analysis, MID’s managers look for firms with attractive returns and capacity for long-term business improvement. Taken together, that approach has helped MID return 26.8% over one year and 16.4% over the last three months.
The Avantis U.S. Mid Cap Equity ETF (AVMC)
Finally, AVMC offers one more intriguing option for active midcap investing. Also launching this past November, the strategy charges just 18 bps for its approach. Rather than just focusing on value or growth, it looks across the midcap investing space overall. That approach has helped the ETF return 13.5% over the last three months, per VettaFi data.
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