If you’re interested in broad exposure to the Mid Cap Value segment of the US equity market, look no further than the Vanguard MidCap Value ETF (VOE), a passively managed exchange traded fund launched on 08/17/2006.
The fund is sponsored by Vanguard. It has amassed assets over $15.63 billion, making it the largest ETFs attempting to match the Mid Cap Value segment of the US equity market.
Why Mid Cap Value
Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. Thus they have a nice balance of growth potential and stability.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.71%.
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 Financials sector–about 19% of the portfolio. Real Estate and Industrials round out the top three.
Looking at individual holdings, Carrier Global Corp. (CARR) accounts for about 1.37% of total assets, followed by Motorola Solutions Inc. (MSI) and Discover Financial Services (DFS).
The top 10 holdings account for about 1.37% of total assets under management.
Performance and Risk
VOE seeks to match the performance of the CRSP U.S. Mid Cap Value Index before fees and expenses. CRSP U.S. Mid Cap Value Index measures the investment return of mid-capitalization value stocks.
The ETF has added roughly 29.79% so far this year and was up about 31.39% in the last one year (as of 11/18/2021). In the past 52-week period, it has traded between $114.17 and $150.69.
The ETF has a beta of 1.11 and standard deviation of 25.90% for the trailing three-year period, making it a medium risk choice in the space. With about 211 holdings, it effectively diversifies company-specific risk.
Vanguard MidCap Value ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VOE is an excellent option for investors seeking exposure to the Style Box – Mid Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares S&P MidCap 400 Value ETF (IJJ) and the iShares Russell MidCap Value ETF (IWS) track a similar index. While iShares S&P MidCap 400 Value ETF has $9.32 billion in assets, iShares Russell MidCap Value ETF has $15.08 billion. IJJ has an expense ratio of 0.18% and IWS charges 0.23%.
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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