Behold: A Basket of Outperforming Mid-Cap Stocks
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add a bunch of extra-promising mid-cap companies to your portfolio, the Guggenheim Mid-Cap Core ETF (NYS: CZA) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously. This ETF aims to outperform major mid-cap indexes by using a proprietary system to select about 100 companies deemed particularly promising.
ETFs often sport lower expense ratios than their mutual fund cousins. The Guggenheim ETF's expense ratio -- its annual fee -- is 0.68%, which is a bit steeper than that of many ETFs, but also considerably lower than that of the typical stock mutual fund. The fund is small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed well, outperforming the S&P 500 over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
What's in it?
Plenty of mid-cap companies that this ETF invests in had strong performances over the past year. Delta Air Lines (NYS: DAL) , for example, soared 16%, which is not an ordinary performance for a typical airline. The industry has long been challenged by fare wars, volatile fuel prices, the expenses of empty seats, weather complications, and labor issues, among other things. Delta is tackling the fuel-price issue in a novel way, by buying a refinery. It has also been collecting a lot of fee revenue from passengers, though that can turn them off, too.
Fiserv (NAS: FISV) , up 14%, is a $10 billion e-commerce giant, offering information management services such as transaction processing to many financial institutions and other companies. Among its new offerings is a service that lets customers pay bills online while still receiving paper versions in the mail. This could be effective in transitioning many customers to cost-saving electronic bill-paying.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. It's hard to find a more dependable industry than garbage collection and recycling, so no one should write off Republic Services (NYS: RSG) , despite its 13% slump. It sports more consistent growth and stronger dividend growth than some of its peers, and though it has been pressured by rising fuel costs, it has also been investing heavily in its higher-margin recycling business.
Check Point Software Technologies (NAS: CHKP) , also down 13%, specializes in network security, which is also likely to be in demand for a long time. Bulls like its recurring and growing subscriber revenue, and its healthy balance sheet.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier. For some compelling investment ideas, check out our special free report, "3 ETFs Set to Soar During the Recovery."
At the time this article was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, holds no position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Check Point Software Technologies.Motley Fool newsletter serviceshave recommended buying shares of Check Point Software Technologies and Republic Services. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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