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Should SPDR S&P MidCap 400 ETF (MDY) Be on Your Investing Radar?

Zacks Equity Research
·4-min read

Looking for broad exposure to the Mid Cap Blend segment of the US equity market? You should consider the SPDR S&P MidCap 400 ETF (MDY), a passively managed exchange traded fund launched on 05/04/1995.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $21.11 billion, making it one of the larger ETFs attempting to match the Mid Cap Blend segment of the US equity market.

Why Mid Cap Blend

With market capitalization between $2 billion and $10 billion, mid cap companies usually contain higher growth prospects than large cap companies, and are considered less risky than their small cap counterparts. Thus they have a nice balance of growth potential and stability.

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Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.23%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.97%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 17.70% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Bio-Techne Corporation (TECH) accounts for about 0.74% of total assets, followed by Molina Healthcare Inc. (MOH) and Cognex Corporation (CGNX).

The top 10 holdings account for about 6.1% of total assets under management.

Performance and Risk

MDY seeks to match the performance of the S&P MidCap 400 Index before fees and expenses. The S&P MidCap 400 Index is composed of 400 selected stocks listed on national stock exchanges, and spans a broad range of major industry groups.

The ETF has gained about 22.62% so far this year and was up about 41.26% in the last one year (as of 10/20/2021). In the past 52-week period, it has traded between $345.43 and $506.04.

The ETF has a beta of 1.17 and standard deviation of 27.50% for the trailing three-year period, making it a medium risk choice in the space. With about 401 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P MidCap 400 ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, MDY is a reasonable option for those seeking exposure to the Style Box - Mid Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard MidCap ETF (VO) and the iShares Core S&P MidCap ETF (IJH) track a similar index. While Vanguard MidCap ETF has $54.01 billion in assets, iShares Core S&P MidCap ETF has $65.06 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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SPDR S&P MidCap 400 ETF (MDY): ETF Research Reports
 
Molina Healthcare, Inc (MOH) : Free Stock Analysis Report
 
Cognex Corporation (CGNX) : Free Stock Analysis Report
 
BioTechne Corp (TECH) : Free Stock Analysis Report
 
iShares Core S&P MidCap ETF (IJH): ETF Research Reports
 
Vanguard MidCap ETF (VO): ETF Research Reports
 
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