Opinions
Terry Shaunessy
iShares S&P US Mid-Cap Index
XMC-T
TOP PICK
Dec 16, 2016
$17.340
Stock price when the opinion was issued
E.T.F.'s
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US small-cap exposure for an RRSP?
MER of XSU is 0.36%. Around for a dog's age. Replicates small-cap index well. Doesn't have the same valuation challenges as with the S&P 500 and concentration of the Magnificent 7.
Also consider XMC for more mid-cap exposure, MER of 0.16%, has done a bit better.
(Don't forget to incorporate foreign, developed areas from EMs ;)
E.T.F.'s
BUY
When you buy these, you're saying you want less emphasis on the Mag 7 and more on the other companies. You're saying mid-cap stocks are going to do better. At this point, he'd say the mid-cap sector is preferred. He's bullish on small caps in the shorter term, and mid-caps also benefit in that environment.
E.T.F.'s
He likes that this has a bit more focus on the domestic US economy, over the S&P 500. Roughly 40%-45% of the S&P 500 sales come from outside of the US, whereas this one is almost 100% domestic. Earnings growth is expected to be pretty fast, somewhere around 11%-12%. That is based on 5% growth in sales, so there is a 2 for 1 leverage on sales to earnings growth. Thinks the 5% sales growth is too low, and it is going to be more like 7%-8%, which means you could get 16%-18% earnings growth. Technology is about 17% of this index, but it is technology, not Internet services. It has 17% financials, mostly community banks.