TSLA - MGC: The Big Can Get Bigger
2023-12-18 10:21:13 ET
Summary
- Vanguard Mega Cap ETF provides exposure to the largest U.S. companies and has a diversified portfolio across multiple sectors.
- The top holdings of MGC include Apple, Microsoft, Amazon, Tesla, and Alphabet.
- Investing in MGC offers the potential for robust growth and strong cash flow, but there may be risks associated with the heavy allocation in the tech sector.
2023 was clearly the year for mega-caps, and while I'm skeptical that outperformance relative to mid-and small-cap stocks continues next year, it's certainly possible the biggest get even bigger. For those that only want exposure to these behemoth companies, the Vanguard Mega Cap ETF (MGC) is the ETF for you.
MGC is a passively managed fund that seeks to track the performance of the CRSP US Mega Cap Index. This index consists of the largest U.S. companies representing about 70% of the U.S. market capitalization. The fund was launched on December 17, 2007, and is sponsored by investment firm, Vanguard. MGC provides investors with broad exposure to the Large Cap Blend segment of the U.S. equity market.
ETF Holdings: Top 5 Positions
MGC's portfolio is diversified across multiple sectors, with the heaviest allocation in the Information Technology sector, which makes up about 37% of the portfolio. Consumer Discretionary and Health Care are the next two largest sectors.
The top holdings are the favorites:
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Apple Inc. ( AAPL ) : This technology giant is MGC's largest holding, accounting for approximately 8.57% of total assets. Known for its iconic iPhone, Apple has consistently demonstrated strong financial performance and robust growth.
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Microsoft Corp. ( MSFT ) : Another tech titan, Microsoft, holds the second-largest position in the fund, representing about 8.55% of total assets. With its diverse product portfolio spanning across cloud computing, productivity software, and hardware, Microsoft is a dominant player in the tech industry.
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Amazon.com Inc. ( AMZN ) : The e-commerce behemoth, Amazon.com, is the third-largest holding, comprising about 4.12% of the total assets. Despite facing some operational challenges, Amazon's diversified business model and strong growth prospects make it a compelling holding.
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Tesla Inc. ( TSLA ) : The electric vehicle and clean energy company.
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Alphabet Inc. ([[GOOGL]] and [[GOOG]]) : Alphabet's diverse portfolio of services, from search and advertising to cloud computing and hardware, ensures its continued growth and profitability.
I'm personally negative on Technology's continued sector leadership given just how outsized the gains were this year, so if you feel similarly, consider that before allocating to MGC or mega-cap funds in general.
Peer Comparison
When comparing MGC to similar funds in the market, it's worthwhile to consider the iShares Core S&P 500 ETF ( IVV ) and the SPDR S&P 500 ETF ( SPY ), both of which track a similar index. They've all performed roughly the same, and fees are all rock bottom, so investing in MGC versus other large-cap funds is likely more a function of brand preference than anything else.
Pros and Cons of Investing
Investing in MGC comes with its pros and cons. On the positive side, the fund provides diversified exposure to America's largest and most profitable companies, ensuring robust growth and strong cash flow. Additionally, the low expense ratio of the fund makes it a cost-efficient option for investors.
On the other hand, the fund's heavy allocation in the tech sector may pose risks if this sector faces a downturn. Moreover, the fund's concentration in the top holdings could impact its performance if any of these companies underperform.
Conclusion: To Invest or Not to Invest?
MGC offers a compelling investment opportunity for those seeking exposure to America's largest and most profitable companies. Despite potential risks, the fund's strong performance, low expense ratio, and diversified portfolio make it a potential core holding in a well-diversified portfolio. I prefer more small-mid-cap exposure next year, but great fund for what it does regardless.
For further details see:
MGC: The Big Can Get Bigger