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Mid Cap ETFs
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About Mid Cap ETFs |
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Mid Cap ETFs Overview and forecast
The Mid Cap ETFs are a mixture of assets, sometimes specialized in specific regional markets, or specifically excluding particular markets. They can include small cap assets, which seems to be working to their advantage recently in the late second quarter of 2009.
Opinions vary about the Micro Cap, Small Cap and Mid Cap ETFs. One view is that these are in some ways speculative, newer and smaller companies with less stability than the major leaguers. Another view is that the smaller cap stocks, not being major weights in their indices, are a bit better suited to the sort of violent fluctuations of the recent market. They do seem to have adjusted better, and more quickly, to market moves, particularly the current rebound.
In practice, there seems to be a combination effect, in terms of movements. While they've moved within the bandwidths fairly consistently, in a Bollinger Band way, in detail their performances in some cases have been excellent recently. That, as the saying goes, is no indication of future performance, but it does show a capacity for moves in investments which in some cases aren't big traders, so it's worth watching.
Behaviorally, the Mid Cap ETFs are interesting. While some are almost twins in terms of price performance, others are quite variable. They all show a common peak and trough in their basic charts, but some of them have moved quite differently. Some of the price behavior is strictly according to models. The inverse Mid Cap ETFs are actually mirror images, almost exactly, of the normal ETFs in this class.
Short term (6 months)
That behavior may work as an attractor to investors, particularly in the lower post crash price ranges. These stocks are in some ways atypical of the ETF model, and in terms of prices, they're only now showing some dynamism as working traders. Their performance at inception price ranges seems to have been previously pretty dismal.
Now, however, there is interest, and the perception of value is obviously working on some level. Volumes are generally low, but moves are reasonably good, in terms of margins within a general upward move. This could fairly be considered an upward adjustment to more reflective valuations, too, so the actual trading bonus effect of added values may not have really kicked in yet.
Medium term (2 years)
The Mid Cap ETFs have things to prove, however, in the medium term. They're not major league, and their recent good returns have come after a history which barely deserves the description of being unimpressive. They went into an almost unanimous slow decline, tanked during the crash, and have only really shown some life after the crash.
If you were backing a horse on that basis, this would be the equivalent of noticing the thing isn't actually dead. The only real appeal of the Mid Cap ETFs has been these good figures for returns over the short term. Longer term numbers aren't at all exceptional, with only three Mid Cap ETFs showing a notable series of good double digit results over the short and longer terms.
Long term (5 years)
The long term analysis has to be highly critical. Many of the Mid Cap ETFs are very small fry, in terms of working capital. Their ability to generate big returns is quite limited. They may trade well, but it's hard to see the billions flowing through the eye dropper of these small scale operations. That, in turn, will find traders looking away, which reduces price moves upwards across interim periods. They have better things to do with their billions.
Other investors are going to be critical, too. They may find the Mid Cap ETFs a logical part of a spread, but not the sort of thing where they want to expend major effort. The Mid Cap ETFs have an image problem, like many ETFs in this capital range. That's unfortunate, because if they can operate the way they have in the short term over longer periods, investors would be justified in taking a lot more interest.
Qualifiers to projections
In justice to their recent good performance, the Mid Cap ETFs do seem to have attracted a lot more interest. They've actually redeemed their rather boring underperformance of their early stages to some extent. Many of them show a slow, irritating decline with which investors are all too familiar over the two year period, followed by a relatively frenzied bouncing session post crash.
The problem looks mechanical. These ETFs are underweight. To do more, the Mid Cap ETFs have to be able to achieve more. Some are seriously, perhaps fatally, undercapitalized, with assets at about $5 million, which would pay to
cure a case of hiccups, but isn't going to have Investment PhDs running down the street yelling Eureka! any time soon on the basis of new revelations in movement of liquidity. The models are miniatures of what might be.
Apathy isn't going to cut it with the market. Nor is novelty, and nor is a sort of conceptual approach where everything can be rationalized on the basis of spreads across ETF themes. This is a performance issue. There's very strong competition for investor money out there, and if the Mid Cap ETFs want to play, they're going to have to bring some cash to play with. Professional investors would be advised to have a good long look at these ETFs, and consider possibilities. There is a case for investment, but the values and the navigation are the big questions over the Mid Cap ETFs.
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Last Updated on: 2010-01-14 02:03:40 |
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