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

The iShares Morningstar Mid-Cap Value ETF (IMCV - Free Report) was launched on June 28, 2004. It is a passively managed exchange-traded fund that aims to provide broad exposure to the Mid Cap Value segment of the U.S. equity market.

Sponsored by Blackrock, the fund has managed to gather assets totaling over $682.35 million. This places it among the average-sized ETFs within the Mid Cap Value segment of the U.S. equity market.

Why Choose Mid Cap Value?

Mid-cap companies, which typically have market capitalizations ranging from $2 billion to $10 billion, are often seen as having a favorable balance of growth potential and stability when compared to their large-cap and small-cap counterparts. They tend to present higher growth prospects than large companies while being less volatile than smaller firms.

Value stocks, characterized by their lower price-to-earnings and price-to-book ratios, also exhibit lower sales and earnings growth rates. Historically, value stocks have outperformed growth stocks across various markets. However, it is important to note that growth stocks may surpass value stocks during strong bull markets.

Cost Considerations

When evaluating an ETF's returns, examining the expense ratios is crucial. Lower-cost funds can lead to significantly better long-term performance, assuming all other factors remain constant. The annual operating expense of IMCV is just 0.06%, which is one of the lowest in its category.

This ETF offers a 12-month trailing dividend yield of 2.11%, making it an attractive option for income-seeking investors.

Sector Allocation and Key Holdings

ETFs generally provide diversified exposure, reducing single stock risk. However, it remains essential to review a fund's holdings before investing. Transparency is a key feature of many ETFs, and IMCV is no exception, as it discloses its holdings daily.

Currently, the ETF has its largest allocation in the Financials sector, making up about 19.40% of its total portfolio. Utilities and Industrials follow as the next two top sectors.

In terms of individual holdings, Williams Inc (WMB - Free Report) comprises roughly 1.18% of total assets, alongside major players such as Capital One Financial Corp (COF - Free Report) and General Motors (GM - Free Report). Collectively, the top 10 holdings represent about 10.58% of the fund's total assets.

Performance and Risk Assessment

IMCV aims to replicate the performance of the MORNINGSTAR US MID CAP BROAD VALUE INDEX, which consists of mid-capitalization U.S. equities demonstrating value characteristics.

As of the end of November 2024, the ETF has delivered a return of approximately 21.06% year-to-date and has risen about 31.33% over the last year. In the last 52 weeks, its share price has fluctuated between $63.66 and $81.

With a beta of 1.08, IMCV carries a slightly higher market risk, and its standard deviation over the past three years has been 17.34%. The fund has around 310 holdings, which helps to mitigate company-specific risks.

Alternative Investment Options

The iShares Morningstar Mid-Cap Value ETF holds a Zacks ETF Rank of 3 (Hold), determined by anticipated asset class returns, expense ratios, and momentum, among other criteria. This makes IMCV a viable candidate for investors looking to gain exposure in the Style Box - Mid Cap Value sector. However, investors may also explore other ETFs in this area.

The iShares Russell Mid-Cap Value ETF (IWS - Free Report) and the Vanguard Mid-Cap Value ETF (VOE - Free Report) follow similar benchmarks. The iShares option boasts $14.38 billion in assets, while the Vanguard version has $18.89 billion. IWS has an expense ratio of 0.23%, while VOE charges 0.07%.

Conclusion

In recent years, both retail and institutional investors have increasingly gravitated towards passively managed ETFs. They offer benefits such as low costs, transparency, flexibility, and tax efficiency, making them excellent choices for long-term investment strategies.

For further insights into this ETF and others, investors are encouraged to look for products that align with their investment objectives and stay informed about the latest trends in the ETF market.

ETF, Investing, Finance