MDCP: High-Conviction Mid-Cap ETF, Still Unconvincing

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deepblue4you MDCP strategy VictoryShares THB Mid Cap ETF (NASDAQ:MDCP) is an actively managed ETF launched on 10/04/2021 with a “high-conviction portfolio of approximately 30 stocks”. It currently ...

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It currently ...</p>\n\n<a href=\"https://seekingalpha.com/article/4704296-mdcp-high-conviction-mid-cap-etf-still-unconvincing\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"MDCP","symbol_name":"VictoryShares THB Mid Cap ESG ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4704296-mdcp-high-conviction-mid-cap-etf-still-unconvincing","article_id":"2451945389","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1478479389/image_1478479389.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2451945389","pubTimestamp":1721134820,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"deepblue4you MDCP strategy VictoryShares THB Mid Cap ETF (NASDAQ:MDCP) is an actively managed ETF launched on 10/04/2021 with a “high-conviction portfolio of approximately 30 stocks”. It currently hol","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"MDCP":"VictoryShares THB Mid Cap ESG ETF","JHMM":"John Hancock Multifactor Mid Cap ETF","BK4550":"红杉资本持仓","XMHQ":"Invesco S&P MidCap Quality ETF","BK4585":"ETF&股票定投概念","BK4588":"碎股","MDY":"标普中型股400指数ETF-SPDR","IWR":"罗素中盘股指数ETF-iShares","VOT":"Vanguard Mid-Cap Growth ETF","FDN":"First Trust Dow Jones Internet I","VOE":"Vanguard Mid-Cap Value ETF"},"translate_title":"MDCP：高度自信的中型ETF，仍不令人信服","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FDN":1,"IWR":1,"JHMM":1,"MDCP":1,"MDY":1,"VOE":1,"VOT":1,"XMHQ":1},"content_text":"deepblue4you MDCP strategy VictoryShares THB Mid Cap ETF (NASDAQ:MDCP) is an actively managed ETF launched on 10/04/2021 with a “high-conviction portfolio of approximately 30 stocks”. It currently holds shares of 29 companies, and has a net expense ratio of 0.55% and a 30-day SEC yield of 0.16%. As described in the prospectus by VictoryShares, The Adviser uses a bottom-up, fundamental research investment process to identify high quality companies it believes have the ability to sustainably grow shareholder equity and that are trading below the Adviser’s assessment of their intrinsic value. First, a multifactor fundamental screening is applied to reduce the universe to about 200 companies, then quantitative and qualitative criteria (including cash flow and revenue growth) are used to focus on a watchlist of approximately 50 companies. The final selection is based on risk measures and a proprietary quality assessment analyzing management, financial strength, industry position and corporate responsibility (including environmental, social, and governance criteria through “ESG” ratings). The methodology for ESG restrictions changed on or about 5/31/2024, but it is not expected to have a material impact on the fund’s investments. The fund primarily holds U.S. common stocks, but may also select ADRs of foreign equities. The portfolio turnover rate was 20% in the most recent fiscal year. This article will use as a benchmark the S&P MidCap 400 Index, represented by SPDR S&P Midcap 400 ETF (MDY). The MDCP portfolio The fund is overweight in industrials with 43.7% of asset value. Then, come information technology (20%) and consumer discretionary (14.9%). Other sectors are below 10%. Compared to the S&P MidCap 400, MDCP heavily overweights industrials and technology. It ignores financials, real estate, energy, utilities and communication.   MDCP Sector breakdown (chart: author; data: Fidelity, SSGA) The portfolio is quite concentrated, with 43.4% of asset value in the top 10 holdings (listed in the table below). Nonetheless, the largest position weighs about 5%, so risks related to individual companies are moderate.   Ticker Name Last EPS growth %TTM P/E TTM P/E fwd Yield   APH Amphenol Corp. 5.12 5.82 42.62 40.61 0.63   HEI HEICO Corp. 5.06 16.27 70.92 62.58 0.10   NVR NVR, Inc. 4.84 0.90 16.82 16.28 0   CSL Carlisle Cos., Inc. 4.32 -1.97 27.72 21.26 0.79   CACI CACI International, Inc. 4.21 10.28 25.40 21.59 0   ROL Rollins, Inc. 4.20 16.96 53.48 48.31 1.24   DHI D.R. Horton, Inc. 4.19 -0.94 10.36 10.70 0.79   WAB Westinghouse Air Brake Technologies Corp. 3.86 43.01 31.93 22.24 0.49   ROST Ross Stores, Inc. 3.80 31.71 24.96 24.60 0.99   PTC PTC, Inc. 3.78 -10.10 77.07 37.61 0   Click to enlarge Fundamentals MDCP is significantly more expensive than the benchmark regarding valuation ratios. It shows a superior aggregate cash flow growth rate, although earnings growth and sales growth are only marginally higher.    MDCP MDY   P/E TTM 25.58 17.97   Price/Book 4.66 2.4   Price/Sales 2.75 1.4   Price/Cash Flow 18.71 11.07   Earnings growth 21.31% 20.41%   Sales growth 9.90% 7.84%   Cash flow growth % 17.88% 9.35%   Click to enlarge Source: Fidelity In my ETF reviews, risky stocks are companies with at least 2 red flags among: bad Piotroski score, negative ROA, unsustainable payout ratio, bad or dubious Altman Z-score, excluding financials and real estate where these metrics are unreliable. With this assumption, MDCP doesn’t hold any risky stock, which is an excellent point. Moreover, based on my calculation of aggregate quality metrics (reported in the next table), portfolio quality is materially superior to the benchmark.    MDCP MDY   Altman Z-score 8.8 3.38   Piotroski F-score 6.25 5.61   ROA % TTM 11.74 5.35   Click to enlarge Although MDCP valuation doesn’t look attractive, it is definitely a high-quality ETF. Performance MDCP is close behind the mid-cap benchmark in total return since inception : MDCP vs. MDY since inception (Seeking Alpha) However, it is lagging by over 5% in 2024 to date: MDCP vs. MDY, year-to-date (Seeking Alpha) Competitors The next table compares characteristics of MDCP and five popular mid-cap ETFs:  iShares Russell Midcap ETF (IWR) Vanguard Mid-Cap Value ETF (VOE) Vanguard Mid-Cap Growth ETF (VOT) Invesco S&P MidCap Quality ETF (XMHQ) John Hancock Multifactor Mid Cap ETF (JHMM)     MDCP IWR VOE VOT XMHQ JHMM   Inception 10/4/2021 7/17/2001 8/17/2006 8/17/2006 12/1/2006 9/28/2015   Expense Ratio 0.55% 0.19% 0.07% 0.07% 0.25% 0.42%   AUM $104.89M $34.81B $28.00B $24.90B $4.92B $3.78B   Avg Daily Volume $4,746.65 $90.34M $41.50M $33.18M $45.69M $9.55M   Holdings 29 819 199 158 83 667   Top 10 43.70% 4.72% 12.02% 17.22% 27.44% 4.69%   Turnover 20.00% 9.00% 22.00% 14.00% 62.00% 14.00%   Click to enlarge MDCP has the highest expense ratio, and it is very thinly traded, which is a bad point. It is also the most concentrated of these funds. The next chart compares total returns, starting on 10/5/2021. MDCP comes in second position, far behind the quality fund XMHQ and shortly ahead of the value fund VOE. MDCP vs competitors since inception (Seeking Alpha) MDCP is the worst performer of this group in 2024 to date: MDCP vs competitors, year-to-date (Seeking Alpha) Takeaway  VictoryShares THB Mid Cap ETF is an actively managed ETF investing in about 30 companies selected with a quantitative and qualitative methodology. MDCP is overweight in industrials and in its top holdings. Valuation metrics are underwhelming, but quality is excellent. The fund’s history is too short to assess its potential on the long term, and it is still unconvincing. In particular, MDCP has lagged by far the passively managed quality fund XMHQ. 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