Benzinga - by Zacks, Benzinga Contributor.
Designed to provide broad exposure to the Mid Cap Value segment of the US equity market, the Invesco S&P MidCap 400 Revenue ETF (ARCA:RWK) is a passively managed exchange traded fund launched on 02/22/2008.
The fund is sponsored by Invesco. It has amassed assets over $766.87 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.
Why Mid Cap Value
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, companies that fall under this category provide a stable and growth-heavy investment.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. 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.
Costs
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 0.39%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.02%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Consumer Discretionary sector--about 21.80% of the portfolio. Industrials and Financials round out the top three.
Looking at individual holdings, TD Synnex Corp (NYSE: SNX) accounts for about 2.90% of total assets, followed by Performance Food Group Co (NYSE: PFGC) and PBF Energy Inc (NYSE: PBF).
The top 10 holdings account for about 17.51% of total assets under management.
Performance and Risk
RWK seeks to match the performance of the OFI Revenue Weighted Mid Cap Index before fees and expenses. The S&P MidCap 400 Revenue-Weighted Index is constructed using a rules-based methodology that re-weights the constituent securities of the S&P MidCap 400 Index according to the revenue earned by the companies in the parent index, subject to a maximum 5% per company weighting.
The ETF has gained about 8.37% so far this year and it's up approximately 31.37% in the last one year (as of 05/14/2024). In the past 52-week period, it has traded between $86.50 and $115.10.
The ETF has a beta of 1.30 and standard deviation of 21.80% for the trailing three-year period, making it a medium risk choice in the space. With about 400 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P MidCap 400 Revenue 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, RWK is a sufficient option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell Mid-Cap Value ETF (ARCA:IWS) and the Vanguard Mid-Cap Value ETF (ARCA:VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $12.91 billion in assets, Vanguard Mid-Cap Value ETF has $16.42 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.
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.
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