Finding the middle ground: mid-cap blend funds may help you hedge your bets as the economy recovers.A fair number of market experts will tell You that middle-sized companies offer a unique opportunity under most market conditions. For one, they often go under appreciated by large brokerage firms until they report dazzling profit news. This means that a well-run mid cap Mid cap A stock with a capitalization usually between $1 billion and $5 billion. is often
poised for the same potential for large gains that investors find in
small companies. Additionally, mid-caps Mid-cap Short for "Middle Cap," mid cap refers to stocks with a market capitalization of between $2 billion to $10 billion.Notes: As the name implies, a mid-cap is in the middle of the pack. A mid-cap isn't too big, but at the same time has a relatively decent market cap.Keep in mind that classifications such as "large cap" or "small cap" are only approximations that change over time. tend to be more established than small-caps, and therefore less likely to undergo extreme volatility when the market drops. Compare this year's results with numbers tainted by the bear market. As of the end of the third quarter 2003, large corporations tracked by the S&P 500 Index had averaged a 14.7% gain. The S&P Small-Cap Index logged a 20,9% gain over the same nine months, and the S&P MidCap benchmark wasn't far behind with a 19.8% tally. Over the last three years through Oct. 6, including the bear market Bear Market A market condition in which the prices of securities are falling or are expected to fall. Although figures can vary, a downturn of 15%-20% or more in multiple indexes (Dow or S&P 500) is considered an entry into a bear market.Notes: When you see a bear what do you do? Tuck in your arms and play dead! Fighting back can be extremely dangerous.,
large-cap shares retreated ah average 9.46% annually, mid caps slid
6.49%, and small-caps averaged ah annual gain of 1.35%.As you look at opportunities for this Year, you may want to hedge your bets with a mid cap blend fund Blend Fund A mutual fund composed of various asset classes (such as stocks, bonds and money market securities), allowing investors to diversify their holdings by owning just a single fund. Also called "hybrid funds".Notes: The risk of blend funds is somewhere between that of growth funds and value funds., a category that the mutual fund
research company Morningstar says incorporates a mix of growth and value
investing styles. As of Oct. 10, 2003, mid-cap blends were up 26%,
thanks in part to a strong rally by technology stocks. Morningstar
analyst, Dan McNeela says, "Coming into a rally, smaller-cap stocks
tend to do well. But the best reason to get interested in [mid-cap blend
funds], however, is [because it's] a way to diversify a large cap
heavy portfolio."We screened Morningstar's database looking for portfolios with the strongest record over the last three years, en indication of how well a fund can perform under rough market conditions. The fund that finished atop our list was the Hussman Strategic Growth Fund, which provided investors a 19.7% average annual return over the three year period ending Oct. 6, 2003. The fund's management often applies hedge fund strategies to investing and have taken sizeable stakes in healthcare and consumer companies. As of this writing, the Hussman fund carried a five star rating from Morningstar, but the portfolios expense ratio was a high 1.99%, and its turnover rate Turnover rate Measures trading activity during a particular period. Portfolios with high turnover rates incur higher transaction costs and are more likely to distribute capital gains, which are taxable to nonretirement accounts. was 199%.The Ariel Appreciation Fund also makes our list. Managed by John Bogers, the Ariel fund boasts a five-star ranking and has had a 12.2% average annual total return over the last three years. Over time, Rogers has aimed to snatch up stocks selling at 40% or more to his calculation of their company's value. His portfolio tends to stock up on financial and consumer companies while carrying a light weighting in technology shares. The Ariel fund posted an impressive 22.4% return for the first nine months of 2003. The fund has a 13% turnover rate and an expense ratio of 1.26%.
Top Mid-Cap Blend Funds
1-Year Ann
Fund Name (Ticker) Total Return *
Hussman Strategic Growth (HSGFX) 15.85%
Icon Leisure & Consumer Staples (CLEX) 20.65
Eagle Growth (EGRWX) 24.33
Kinetics Paradigm (WWNPX) 38.08
IMS Capital Value (IMSCX) 58.49
FMI Common Stock [FMIMX) 26.16
Ariel Appreciation (CAAPX) 34.18
3-Year Ann.
Fund Name (Ticker) Total Return *
Hussman Strategic Growth (HSGFX) 19.73%
Icon Leisure & Consumer Staples (CLEX) 13.46
Eagle Growth (EGRWX) 13.23
Kinetics Paradigm (WWNPX) 13.08
IMS Capital Value (IMSCX) 12.70
FMI Common Stock [FMIMX) 12.32
Ariel Appreciation (CAAPX) 12.24
5-Year Ann.
Fund Name (Ticker) Total Return *
Hussman Strategic Growth (HSGFX) N/A
Icon Leisure & Consumer Staples (CLEX) 11.83
Eagle Growth (EGRWX) 10.38
Kinetics Paradigm (WWNPX) N/A
IMS Capital Value (IMSCX) 16.13
FMI Common Stock [FMIMX) 14.96
Ariel Appreciation (CAAPX) 13.42
Toll-Free
Fund Name (Ticker) Number
Hussman Strategic Growth (HSGFX) 800-487-7626
Icon Leisure & Consumer Staples (CLEX) 800-764-0442
Eagle Growth (EGRWX) 800-749-9933
Kinetics Paradigm (WWNPX) 800-930-3828
IMS Capital Value (IMSCX) 800-934-5550
FMI Common Stock [FMIMX) 800-811-5311
Ariel Appreciation (CAAPX) 800-292-1435
Minimum
Fund Name (Ticker) Initial Investment
Hussman Strategic Growth (HSGFX) $1,000
Icon Leisure & Consumer Staples (CLEX) 1,000
Eagle Growth (EGRWX) 500
Kinetics Paradigm (WWNPX) 2,500
IMS Capital Value (IMSCX) 5,000
FMI Common Stock [FMIMX) 1,000
Ariel Appreciation (CAAPX) 1,000
* AS OF OCTOBER 6, 2003. SOURCE: MORNINGSTAR INC.
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