Should the iShares Morningstar Mid-Cap Value ETF (IMCV) Be on Your Investing Radar?

The iShares Morningstar Mid-Cap Value ETF (IMCV - Free Report) launched on June 28, 2004, as a passively managed exchange-traded fund designed to provide extensive exposure to the mid-cap value segment of the U.S. equity market.

This fund is sponsored by Blackrock and has accumulated assets exceeding $682.35 million, making it an average-sized ETF targeting the mid-cap value sector.

Why Consider Mid Cap Value?

Mid-cap companies, typically defined with market capitalizations between $2 billion and $10 billion, often present a unique blend of growth potential and stability compared to both large and small cap firms. They usually exhibit higher growth prospects yet tend to display less volatility than smaller counterparts.

Value stocks – characterized by lower price-to-earnings and price-to-book ratios – usually lag behind in sales and earnings growth rates. Interestingly, value stocks tend to outperform growth stocks in most markets over the long term, although growth stocks may accelerate performance during strong bull markets.

Cost Considerations

Expense ratios play a crucial role in determining an ETF’s total return. Generally, lower-cost funds perform better over time when compared to their pricier peers, assuming all other factors are equal.

The iShares Morningstar Mid-Cap Value ETF boasts an impressive annual expense ratio of just 0.06%, making it one of the least expensive options in its category.

As for income generation, the fund currently offers a trailing 12-month dividend yield of 2.11%.

Sector Exposure and Key Holdings

ETFs like IMCV provide diversified exposure, which helps minimize the risks associated with individual stock investments. However, understanding the specific portfolio holdings is crucial before committing funds.

IMCV's portfolio has the largest allocation in the Financial sector, comprising approximately 19.40% of its total investments. This is followed by significant allocations in Utilities and Industrials.

In terms of individual holdings, companies such as Williams Inc (WMB) make up about 1.18% of the total assets, alongside notable firms such as Capital One Financial Corp (COF) and General Motors (GM). Collectively, the top ten holdings account for approximately 10.58% of the fund’s assets under management.

Performance and Risk Assessment

IMCV aims to replicate the performance of the MORNINGSTAR US MID CAP BROAD VALUE INDEX prior to expenses. This index comprises U.S. mid-cap stocks that exhibit value characteristics.

As of November 29, 2024, the ETF showcases a year-to-date return of around 21.06%, with a one-year increase of roughly 31.33%. Over the past 52 weeks, it has traded within a range of $63.66 to $81.

With a beta of 1.08 and a standard deviation of 17.34% over the trailing three years, IMCV demonstrates effective diversification with its 310 holdings, helping to mitigate company-specific risks.

Alternatives to Consider

IMCV carries a Zacks ETF Rank of 3 (Hold), which takes into account factors such as expected asset class performance, expense ratios, and momentum. Therefore, it serves as a reasonable option for those seeking exposure to the mid-cap value segment of the market. However, investors should also explore other ETFs in this category.

For instance, the iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) follow similar indices. The IWS fund has total assets of $14.38 billion, while VOE manages $18.89 billion in assets. IWS comes with an expense ratio of 0.23%, whereas VOE charges slightly lower at 0.07%.

The Bottom Line

As more retail and institutional investors turn to passively managed ETFs for their low costs, transparency, flexibility, and tax efficiency, these funds remain excellent choices for long-term investment strategies.

For additional insights into this product and other ETFs, it is advisable to screen for options that align with specific investment goals and to stay informed about the latest developments in the ETF investing arena.

ETF, Investing, MidCap