Wednesday, March 13, 2013

The broad US market has been the story thus far in 2013 and Quant’s upper ranks have highlighted various large cap and small cap funds that have been among the world’s best performers.  Today we see some mid cap funds getting their turn in the top 10.  Today’s 10th place SPDR S&P MidCap 400 Fund (MDY) got as high as 9th place last week, its highest rank this year, and the 8th place iShares S&P MidCap 400 Growth Index Fund (IJK) achieves the top 10 for the first time in 2013.  While new to the top 10, both funds have been ranking well as they keep pace with the market’s historic melt up.

That rally has kept their technical scores strong at around 70 for each with plenty of market skepticism also keeping their sentiment scores at elevated levels.  Fundamentally both score well with IJK’s 72 Fundamental Score beating MDY’s 66.5 even though the latter is cheaper on most metrics.  The lower score is attributable to MDY’s longer lifespan which includes more data points to compare against.  A look at each tear sheet differentiates the two.  The higher ranking IJK holds more than half its AUM in info tech, industrials and consumer discretionary where MDY’s top three sectors see more than half of AUM in financials, industrials and info tech.  So your preference between financials and consumer discretionary should drive your decision more than 2 places in Quant’s rankings.  IJK gets the higher Green Diamond Reward Rating of 9.13 but MDY’s 8.87 is very close.  The weightings in financials versus consumer discretionary could account for MDY’s higher Red Diamond Risk Rating of 4.56 compared to IJK’s 4.09.  Regular readers will notice those Risk Ratings are higher than Quant’s recent high rankers and they have brought the average of the top 10 up to 3.85 which is still low compared to today’s all equity fund average of 4.58.

Whether the melt up continues or not, Quant says these two funds will outperform most others in the next few months.  Their Behavioral Scores account for their rise in the ranks which may suggest the market is looking to broaden out to riskier names.  Only time will tell but we have been waiting for some turnover in the top ranks which have been remarkably stable since late last year.  We’re glad that stability has been in the sweet spot of the market and we are on the lookout for the next sector or region that rises in the ranks.  So check in each day for the latest on what Quant has to say.

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