Best & worst: Midcap blend

The midcap blend style ranks eighth out of the 12 fund styles as detailed in my style roadmap. It gets my dangerous rating, which is based on aggregation of ratings of 20 ETFs and 270 mutual funds in the mid-cap blend style as of May 1, 2012.

Reports on the best & worst ETFs and mutual funds in every sector and style are on my blog and Trading Deck.

Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst ETFs and mutual funds, which allocate too much value to neutral-or-worse-rated stocks.

To identify the best and avoid the worst ETFs and mutual funds within the midcap blend style, investors need a predictive rating based on (1) stocks ratings of the holdings and (2) the all-in expenses of each ETF and mutual fund. Investors need not rely on backward-looking ratings. My fund rating methodology is detailed here.

Investors should not buy any midcap blend ETFs or mutual funds because none get an attractive-or-better rating. If you must have exposure to this style, you should buy a basket of attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history of not paying off.

See ratings and reports on all ETFs and mutual funds in this style on my free mutual fund and ETF screener.

Figure 1: ETFs with the best & worst ratings - Top 5

* Best ETFs exclude ETFs with less NAV's less than 100 million.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual funds with the best & worst ratings - Top 5

* Best mutual funds exclude funds with NAV's less than 100 million.

Sources: New Constructs, LLC and company filings

Vanguard Midcap ETF VO is my top-rated midcap blend ETF and Westport Funds: Westport Select Cap Fund WPSCX is my top-rated midcap blend mutual fund. Both earn my Neutral rating.

SPDR DJ Wilshire Midcap ETF EMM is my worst-rated midcap blend ETF and earns my Dangerous rating. Lord Abbett Securities Trust: Lord Abbett Value Opportunities Fund LVOAX is my worst-rated midcap blend mutual fund and earns my most dangerous rating.

Figure 3 shows that 467 out of the 2523 stocks (over 26% of the total net assets) held by midcap blend ETFs and mutual funds get an attractive-or-better rating. However, none of the 20 midcap blend ETFs and none of the 270 mid-cap blend mutual funds get an attractive-or-better rating.