2023-06-14 10:40:36 ET
Wells Fargo's equity strategy team argued Wednesday that investors should rotate towards mid-cap growth stocks to take advantage of stable earnings and relatively low valuations.
“We believe the rotation into mid- and small-caps that started earlier this month has legs and recommend either putting on ETF trades such as MDY/SPY or IWM/SPY, or tilting the portfolio toward mid-cap growth names, our best risk/reward idea,” the bank stated in an investor note towards its clients.
Wells Fargo added that mid-cap growth space represents a “great risk/reward for investors,” due in part to what they deem are reasonable valuations (16x), stable earnings stream, and a de-rating of performance as well as fundamentals over the last several years.
The firm added: “We prefer mid-cap growth to small caps long term because they are less levered, have better access to capital, and are not as reliant on an economic recovery for EPS growth.”
For investors that share a similar viewpoint with Wells Fargo, see listed below some of Wall Street’s most popular mid-cap exchange traded funds along with their year-to-date price action.
Mid-Cap ETFs
- SPDR S&P Midcap 400 ETF Trust ( MDY ) +7.5% .
- iShares Russell Midcap ETF ( IWR ) +6.9% .
- Vanguard Mid-Cap ETF ( VO ) +6.7% .
- Vanguard Mid-Cap Growth ETF ( NYSEARCA: VOT ) +12.9% .
- iShares S&P Mid-Cap 400 Growth ETF ( NYSEARCA: IJK ) +8.9% .
- SPDR S&P 400 Mid Cap Growth ETF ( NYSEARCA: MDYG ) +9.1% .
- iShares Morningstar Mid-Cap Growth ETF ( NYSEARCA: IMCG ) +11.6% .
- Vanguard S&P Mid-Cap 400 Growth ETF ( IVOG ) +9.6% .
- First Trust Mid Cap Growth AlphaDEX Fund ( FNY ) +14.2% .
- Invesco S&P MidCap 400 Pure Growth ETF ( RFG ) +8.2% .
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Wells Fargo touts a rotation towards mid-cap growth