XMMO - GRPM: Strategy Change Prompts Huge Returns For This S&P MidCap 400 GARP ETF
2024-04-30 05:27:47 ET
Summary
- GRPM has tracked the S&P MidCap 400 GARP Index effective August 28, 2023. Since that change, it's been one of the top-performing mid-cap funds on the market.
- Backtested data provided by S&P Dow Jones Indices indicates this substantial outperformance is an anomaly. The Index's ten-year monthly win rate is 54%, though its recent performance was excellent.
- My fundamental analysis reveals GRPM to be highly volatile (1.43 five-year beta), though its growth and value combination beats nearly every other fund in its category, as expected.
- The caveat is that the Index relies on historical metrics to select 49-72 mid-cap stocks. Unfortunately, consensus estimates aren't optimistic, and GRPM's estimated EPS growth rate is 7% lower than the S&P MidCap 400 Index benchmark.
- Given the uncertainty and volatility, I've assigned a "hold" rating to GRPM and recommend investors proceed with caution.