iQ Mid Cap Value Model
INVESTMENT OBJECTIVE
The iQ Mid Cap Value Model seeks to generate long-term returns in excess of the total return of the S&P 400 Barra Value Index, with less down-market volatility than the index.
PROCESS
The iQ Mid-Cap Value Model represents an equal-weighted portfolio of mid-cap value stocks that have displayed strong Fundamentals with low valuations.
Start with the 400 stocks of the S&P 400 Mid-Cap Index.
Sort the 400 stocks by price-to-book ratio and select the bottom 200 stocks.
Sort the remaining 200 stocks by Value, Price, and Earnings Momentum and select the top 100.
Sort the remaining 100 stocks by Price-to-Sales Ratios and select the bottom 50.
Sort the remaining 50 stocks by 5 Year Earnings Growth and select the top 10.
This model reconstitutes every February, May, August and November
Why invest in mid-cap value stocks?
Investing in mid-cap value stocks can offer several benefits, including:
Growth Potential: Mid-cap value stocks offer potential for higher growth compared to larger, more established companies, as they are in a phase of expansion and development.
Undervalued Opportunities: Investing in value stocks means gaining exposure to companies that are currently undervalued in the market, offering a chance for price appreciation as the market recognizes their true worth.
Diversification: Including mid-cap value stocks in a portfolio adds diversification, reducing the reliance on large-cap stocks and providing exposure to a different segment of the market.
Market Efficiency: Mid-cap stocks are often less researched and followed by analysts, creating opportunities for investors to find less efficient market pricing and make well-informed investment decisions.
Potential for Long-Term Returns: By holding value stocks in the mid-cap range, investors may benefit from both capital appreciation and income generation, providing the potential for attractive long-term returns.
Investing in mid-cap value stocks involves risks and considerations that investors should carefully evaluate. Mid-cap stocks are subject to market fluctuations, and the value of investments may rise or fall based on various factors, including economic conditions and changes in company fundamentals. Mid-cap companies may have higher growth potential compared to larger companies, but they may also be more sensitive to economic cycles and have less market liquidity. Investing in value stocks may involve undervalued companies that have lower stock prices relative to their intrinsic value, but these stocks may not experience immediate price appreciation.