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Should iShares Morningstar Mid-Cap Growth ETF (JKH) Be on Your Investing Radar?

Zacks Equity Research
Huntington Ingalls' (HII) total revenues came in at $2.08 billion, which outpaced the Zacks Consensus Estimate of $1.92 billion by 8.3%

Designed to provide broad exposure to the Mid Cap Growth segment of the US equity market, the iShares Morningstar Mid-Cap Growth ETF (JKH) is a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $285.32 M, making it one of the average sized ETFs attempting to match the Mid Cap Growth segment of the US equity market.

Why Mid Cap Growth

Mid cap companies have market capitalization between $2 billion and $10 billion. They usually have higher growth prospects than large cap companies and are less volatile than small cap companies. Thus they have a nice balance of growth potential and stability.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

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 0.30%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.39%.

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 Information Technology sector--about 29.80% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Twitter Inc (TWTR) accounts for about 1.56% of total assets, followed by Align Technology Inc (ALGN) and Oreilly Automotive Inc (ORLY).

The top 10 holdings account for about 11.4% of total assets under management.

Performance and Risk

JKH seeks to match the performance of the Morningstar Mid Growth Index before fees and expenses. The Morningstar Mid Growth Index measures the performance of stocks issued by mid-capitalization companies. The Morningstar index methodology defines mid-capitalization stocks as those stocks that form the 20% of market capitalization between the 70th and 90th percentile of the market capitalization of the stocks eligible to be included in the Morningstar US Market Index.

The ETF has added about 12.91% so far this year and was up about 22.85% in the last one year (as of 07/20/2018). In the past 52-week period, it has traded between $180.53 and $228.26.

The ETF has a beta of 1 and standard deviation of 14.43% for the trailing three-year period, making it a medium risk choice in the space. With about 203 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar Mid-Cap Growth ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, JKH is an outstanding option for investors seeking exposure to the Mid Cap ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares S&P Mid-Cap 400 Growth ETF (IJK) and the iShares Russell Mid-Cap Growth ETF (IWP) track a similar index. While iShares S&P Mid-Cap 400 Growth ETF has $8.32 B in assets, iShares Russell Mid-Cap Growth ETF has $9.23 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ISHARS-MO MC GR (JKH): ETF Research Reports
 
Twitter, Inc. (TWTR) : Free Stock Analysis Report
 
O'Reilly Automotive, Inc. (ORLY) : Free Stock Analysis Report
 
ISHARS-RS M GR (IWP): ETF Research Reports
 
Align Technology, Inc. (ALGN) : Free Stock Analysis Report
 
ISHARS-SP MC GR (IJK): ETF Research Reports
 
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Zacks Investment Research