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Is WisdomTree U.S. MidCap ETF (EZM) a Strong ETF Right Now?

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Launched on 02/23/2007, the WisdomTree U.S. MidCap ETF (EZM - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Mid Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by Wisdomtree. It has amassed assets over $721.42 million, making it one of the average sized ETFs in the Style Box - Mid Cap Value. EZM, before fees and expenses, seeks to match the performance of the WisdomTree U.S. MidCap Earnings Index.

The WisdomTree U.S. MidCap Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the mid-capitalization segment of the U.S. Stock Market.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for this ETF are 0.38%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.37%.

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.

EZM's heaviest allocation is in the Financials sector, which is about 21.40% of the portfolio. Its Consumer Discretionary and Industrials round out the top three.

Taking into account individual holdings, Ovintiv Inc (OVV - Free Report) accounts for about 0.98% of the fund's total assets, followed by Nrg Energy Inc (NRG - Free Report) and Cleveland-Cliffs Inc (CLF - Free Report) .

EZM's top 10 holdings account for about 7.26% of its total assets under management.

Performance and Risk

Year-to-date, the WisdomTree U.S. MidCap ETF has lost about -12.66% so far, and is down about -8.93% over the last 12 months (as of 10/31/2022). EZM has traded between $43.88 and $57.18 in this past 52-week period.

The ETF has a beta of 1.20 and standard deviation of 31.21% for the trailing three-year period, making it a medium risk choice in the space. With about 572 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. MidCap ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell MidCap Value ETF (IWS - Free Report) tracks Russell MidCap Value Index and the Vanguard MidCap Value ETF (VOE - Free Report) tracks CRSP U.S. Mid Cap Value Index. IShares Russell MidCap Value ETF has $12.99 billion in assets, Vanguard MidCap Value ETF has $15.67 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Value.

Bottom Line

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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