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Should iShares Morningstar MidCap Growth ETF (IMCG) Be on Your Investing Radar?

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Launched on 06/28/2004, the iShares Morningstar MidCap Growth ETF (IMCG - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Mid Cap Growth segment of the US equity market.

The fund is sponsored by Blackrock. It has amassed assets over $1.22 billion, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

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.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.06%, making it the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.91%.

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 Information Technology sector--about 22.20% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Microchip Technology Inc (MCHP - Free Report) accounts for about 0.98% of total assets, followed by Msci Inc (MSCI - Free Report) and Enphase Energy Inc (ENPH - Free Report) .

The top 10 holdings account for about 7.32% of total assets under management.

Performance and Risk

IMCG seeks to match the performance of the MORNINGSTAR US MID CAP BROAD GROWTH INDX before fees and expenses. The Morningstar US Mid Cap Broad Growth Index comprises of mid-capitalization U.S. equities that exhibit growth characteristics.

The ETF has lost about -0.61% so far this year and is down about -25.51% in the last one year (as of 01/04/2023). In the past 52-week period, it has traded between $49.20 and $69.58.

The ETF has a beta of 1.06 and standard deviation of 28.37% for the trailing three-year period. With about 346 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar MidCap Growth 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, IMCG is a sufficient option for those seeking exposure to the Style Box - Mid Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The Vanguard MidCap Growth ETF (VOT - Free Report) and the iShares Russell MidCap Growth ETF (IWP - Free Report) track a similar index. While Vanguard MidCap Growth ETF has $9.26 billion in assets, iShares Russell MidCap Growth ETF has $11.69 billion. VOT has an expense ratio of 0.07% and IWP charges 0.23%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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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