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Designed to provide broad exposure to the Mid Cap Value segment of the US equity market, the Invesco S&P MidCap 400 Revenue ETF (RWK) is a passively managed exchange traded fund launched on 02/22/2008.

The fund is sponsored by Invesco. It has amassed assets over $917.97 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Compared to large and small cap companies, mid cap businesses tend to have higher growth prospects and are less volatile, respectively, with market capitalization between $2 billion and $10 billion. These types of companies, then, have a good balance of stability and growth potential.

Carrying lower than average price-to-earnings and price-to-book ratios, value stocks also have lower than average sales and earnings growth rates. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.39%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 1.03%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 23.50% of the portfolio. Consumer Discretionary and Financials round out the top three.

Looking at individual holdings, American Airlines Group Inc (AAL) accounts for about 2.96% of total assets, followed by Performance Food Group Co (PFGC) and Td Synnex Corp (SNX).

The top 10 holdings account for about 18% of total assets under management.

Performance and Risk

RWK seeks to match the performance of the OFI Revenue Weighted Mid Cap Index before fees and expenses. The S&P MidCap 400 Revenue-Weighted Index is constructed using a rules-based methodology that re-weights the constituent securities of the S&P MidCap 400 Index according to the revenue earned by the companies in the parent index, subject to a maximum 5% per company weighting.

The ETF has added roughly 17.25% so far this year and is up about 29.45% in the last one year (as of 11/22/2024). In the past 52-week period, it has traded between $95.61 and $123.18.

The ETF has a beta of 1.25 and standard deviation of 21.77% for the trailing three-year period, making it a medium risk choice in the space. With about 401 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap 400 Revenue ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, RWK is a good option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $14.11 billion in assets, Vanguard Mid-Cap Value ETF has $18.59 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

The Invesco S&P MidCap 400 Pure Value ETF (RFV) was launched on 03/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Mid Cap Value segment of the US equity market.

The fund is sponsored by Invesco. It has amassed assets over $283.40 million, making it one of the average sized ETFs attempting to match the Mid Cap Value segment of the US equity market.

Why Mid Cap Value

Mid cap companies, with market capitalization in the range of $2 billion and $10 billion, offer investors many things that small and large companies don't, including less risk and higher growth opportunities. These types of companies, then, have a good balance of stability and growth potential.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.88%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Consumer Discretionary sector--about 23.30% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, Avnet Inc (AVT) accounts for about 2.76% of total assets, followed by Td Synnex Corp (SNX) and Mastec Inc (MTZ).

The top 10 holdings account for about 23.25% of total assets under management.

Performance and Risk

RFV seeks to match the performance of the S&P MidCap 400 Pure Value Index before fees and expenses. The S&P MidCap 400 Pure Value Index measures the performance of securities that exhibit strong value characteristics in the S&P MidCap 400 Index.

The ETF return is roughly 7.32% so far this year and was up about 22.18% in the last one year (as of 11/18/2024). In the past 52-week period, it has traded between $102.76 and $127.28.

The ETF has a beta of 1.34 and standard deviation of 22.19% for the trailing three-year period, making it a high risk choice in the space. With about 88 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P MidCap 400 Pure Value ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, RFV is a good option for those seeking exposure to the Style Box - Mid Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell Mid-Cap Value ETF (IWS) and the Vanguard Mid-Cap Value ETF (VOE) track a similar index. While iShares Russell Mid-Cap Value ETF has $13.76 billion in assets, Vanguard Mid-Cap Value ETF has $18.22 billion. IWS has an expense ratio of 0.23% and VOE charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

As the tech sector heads into Q4 with factors like recent market corrections, profit-taking after a volatile year, and stronger-than-expected earnings in sub sectors like cloud computing and semiconductors, the companies are showing signs of potential rebound.

Amid this backdrop, investors looking for an opportunity to invest might consider adding strong fundamental tech stocks, TD SYNNEX Corporation , Jabil Inc. , and Dropbox, Inc. , as they are trading at discounts.

With market sentiment starting to improve and economic data stabilizing, there has been a bull market momentum for tech stocks. Out of eleven S&P 500 sectors, the information technology sector is ranked ninth, where it is the largest sector, comprising nearly 32% of the index’s value.

As companies lean more into digital transformation, tech stocks in software, hardware, and cloud sectors are anticipated to benefit from increasing demand. For the tech sector specifically, analysts are optimistic about a potential return to modest growth in 2024, with more robust prospects for 2025. As per the Deloitte report, economists project that AI-related investments will reach $200 billion globally by 2025.

According to Statista, the global IT services market is anticipated to reach $1.88 trillion by 2029, growing at a CAGR of 5.8%. Moreover, analysts expect growth-oriented stocks to recover, especially those with proven innovation and robust cash flows, setting the stage for undervalued tech stocks to gain renewed interest.

Considering these conducive trends, let’s assess the fundamentals of the three abovementioned Technology - Services stocks, starting with the third choice.

Stock #3: TD SYNNEX Corporation (SNX)

SNX operates as a global distributor and solutions aggregator for the IT ecosystem. It has two primary solution portfolios: Endpoint Solutions and Advanced Solutions. The company provides personal computing devices, endpoint technology software, and a range of data center technologies, including hybrid cloud, security, storage, networking, servers, and computing components.

On October 15, SNX’s subsidiary, Hyve Solutions Corporation, announced the launch of its Orion product line featuring the NVIDIA HGX platform. These solutions are optimized for the NVIDIA Hopper platform and are fully compatible with the NVIDIA Blackwell platform, ensuring customers address both present and emerging AI computational needs. The new launch offers a seamless solution to the customers.

On October 10, SNX launched its Destination AI Practice Accelerator to fast-track AI go-to-market efforts and monetization for partners. This launch enables partners to identify AI opportunities for their end customers and build an AI practice to meet those needs with a customized strategy and support.

In terms of forward non-GAAP P/E, SNX is trading at 9.86x, 58.9% lower than the industry average of 24.00x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 0.22 and 0.17 are 92.4% and 94.2% lower than their respective industry averages of 2.95 and 2.93.

In the fiscal third quarter that ended on August 31, 2024, SNX’s revenue increased 5.2% year-over-year to $14.68 billion. The company reported an operating income[AD1] of $302.88 million, indicating a 26.1% growth from the prior-year quarter.

SNX’s net income came in at $178.56 million, up 28.2% year-over-year, while its non-GAAP earnings per share grew 2.9% from the year-ago value to $2.86.

Analysts expect SNX’s revenue for the fiscal year (ending November 2024) to increase marginally year-over-year to $57.90 billion, while its EPS for the same period is expected to grow 3.53%from the prior year’s period to $11.66.

The stock has gained 24.2% over the past year and 14.4% over the past nine months to close the last trading session at $115.50.

SNX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

SNX has a B grade for Value and Sentiment. It is ranked #18 out of 77 stocks in the Technology - Services industry. Click here to see the additional ratings for SNX (Growth, Momentum, Stability, and Quality).

Stock #2: Jabil Inc. (JBL)

JBL is a worldwide provider of manufacturing services and solutions. It operates in two segments: Electronics Manufacturing Services and Diversified Manufacturing Services. The company specializes in electronics design, production, product management, circuit design, firmware development, prototyping, and the design of plastic and metal enclosures with integrated electro-mechanical components like PCBA.

On October 14, JBL introduced an expansion of its server portfolio with the J421E-S and J422-S servers, powered by AMD 5th Generation EPYC and Intel Xeon 6 processors. This addition is efficient, high in performance, and optimized for AI, FinTech, and cloud applications.

On October 3, JBL completed its acquisition of Mikros Technologies LLC, a leader in the engineering and manufacturing of liquid cooling solutions for thermal management. This acquisition will allow JBL to extend its range of services and will also help its customers manage the intense thermal requirements of their current and next-generation products.

In terms of forward non-GAAP P/E, JBL is trading at 15.07x, 37.2% lower than the industry average of 24.00x. Likewise, the stock’s forward EV/Sales and Price/Cash Flow multiples of 0.58 and 0.53 are 80.2% and 81.8% lower than the industry averages of 2.95x and 2.93x, respectively.

JBL’s net revenue for the fiscal 2024, which ended on August 31, stood at $28.88 billion. Its operating income grew 31% from the prior year’s period to $2.01 billion.

The company’s net income attributable rose 69.7% from the year-ago value to $1.39 billion, while its EPS stood at $11.17, up 85.5% year-over-year. In addition, JBL’s adjusted free cash flow rose 2.8% from the year-ago value to $1.06 million.

Street expects SNX’s revenue for the fiscal third quarter (ending May 2025) to increase marginally year-over-year to $6.81 billion. Its EPS for the same period is expected to register a 20.1% growth from the prior year, settling at $2.27. In addition, it surpassed the EPS in three of the trailing four quarters, which is promising.

JBL shares have surged 17.1% over the past three months and 11.6% over the past six months to close the last trading session at $127.67.

It’s no surprise that JBL has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B for Growth, Value, and Quality. Out of 77 stocks in the same industry, JBL is ranked #8.

Beyond what is stated above, we’ve also rated JBL for Stability and Sentiment. Get all JBL’s ratings here.

Stock #1: Dropbox, Inc. (DBX)

DBX provides tools to help distributed teams prioritize, get organized, and keep work moving securely from anywhere. The company’s platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app and upgrade to a paid subscription plan for premium features.

On October 15, DBX announced Dropbox Dash for Business, an AI-powered universal search product. This launch makes it easy for teams to find, organize, share, and secure company information, which helps save time and cost.

In terms of forward non-GAAP P/E, DBX is trading at 11.60x, which is 51.7% lower than the industry average of 24.00x. The stock’s forward Price/Cash Flow ratio of 8.88x is 58.5% below the industry average of 21.38x. Also, its forward EV/EBITDA multiple of 9.31 compares to the industry average of 14.51x.

For the second quarter of 2024, which ended on June 30, DBX’s total revenues increased marginally year-over-year to $634.50 million. Its non-GAAP income from operations stood at $227.90 million, indicating a 6.9% growth from the prior-year quarter, with a non-GAAP operating margin of 35.9% (up 170 bps year-over-year).

DBX’s non-GAAP net income amounted to $194.10 million and $0.60 per share, reflecting 11.6% and 17.6% year-over-year increases, respectively. Also, the company’s non-GAAP free cash flow grew by 21.7% from the year-ago value to $224.7 million.

The consensus revenue estimate of $642.81 million for the fiscal fourth quarter (ending December 2024) represents a marginal increase year-over-year. The consensus EPS estimate of $0.53 for the same quarter indicates a 5.1% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Over the past three months, the stock has gained 11.9%, closing the last trading session at $25.98.

DBX’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It also has an A grade of Quality and a B for Value. Within the Technology - Services industry, it is ranked #6. Click here to see DBX’s ratings for Growth, Momentum, Stability, and Sentiment.

What To Do Next?

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JBL shares were trading at $128.32 per share on Monday afternoon, up $0.65 (+0.51%). Year-to-date, JBL has gained 0.93%, versus a 21.27% rise in the benchmark S&P 500 index during the same period.