The Case for Mid-Cap Growth

Mid-cap growth stocks tend to provide higher growth rates and lower valuations than larger-cap equities, while enjoying less volatility and more liquidity than their smaller-cap counterparts. After posting three consecutive negative years from 2000-2002, mid-cap growth funds have rebounded with strong positive performances the past two calendar years, buoyed by the resurgent domestic economy.

One of the better longer-term performers within the mid-cap growth universe is the $298 million Munder MidCap Select Fund (MGOYX), which invests in companies that can deliver consistent, above-average earnings growth. With 66 holdings in the portfolio as of Feb. 28, the portfolio is broadly diversified by sector–the top industries consisted of consumer discretionary (19.4%), health care (13.6%), information technology (13.5%), and financials (13.2%). The top 10 holdings represented only 22.2% of the fund’s total assets.

Co-managed by Shi Cao, Tony Dong, and Brian Matuszak, the fund typically comprises between 50 and 100 stocks of companies represented by the S&P MidCap 400 index. Unlike most growth investors, the managers don’t buy and sell much: turnover is a low 53.3%, far below the 134% average for the asset class.