Should IShares Morningstar Mid-Cap Growth ETF (JKH) Be On Your Investing Radar?

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

The fund is sponsored by Blackrock (NYSE:BLK). It has amassed assets over $265.02 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

With market capitalization between $2 billion and $10 billion, mid cap companies usually contain higher growth prospects than large cap companies, and are considered less risky than their small cap counterparts. Thus, companies that fall under this category provide a stable and growth-heavy investment.

Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. 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 0.42%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 31.50% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Red Hat Inc (NYSE:RHT) accounts for about 1.51% of total assets, followed by Servicenow Inc (NOW) and Edwards Lifesciences Corp (EW).

The top 10 holdings account for about 12.59% 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 return is roughly 4.79% so far this year and was up about 18.99% in the last one year (as of 05/10/2018). In the past 52-week period, it has traded between $176.62 and $218.58.

The ETF has a beta of 1 and standard deviation of 14.44% for the trailing three-year period, making it a medium risk choice in the space. With about 213 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar Mid-Cap Growth 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, JKH is a sufficient option for those seeking exposure to the Mid Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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 $7.91 B in assets, iShares Russell Mid-Cap Growth ETF has $8.67 B. IJK has an expense ratio of 0.25% and IWP charges 0.25%.

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.