An Easy Way to Zero In on the Growing Large- and Mid-Cap Markets

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some sizable companies to your portfolio, the Guggenheim Russell 1000 Equal Weight ETF (UNKNOWN: EWRI.DL  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously. It weights its holdings equally, instead of by market cap, as many indexes do.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Guggenheim ETF's expense ratio -- its annual fee -- is a relatively low 0.42%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF is too young to have a sufficient track record to assess. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why large companies?
Large companies can add some ballast to your collection. Many may not grow as briskly as their smaller counterparts, but to reach their current size, they probably have some strong assets and features. And some can grow quite briskly, too. This ETF focuses on ones that seem undervalued according to some measures, which can boost the overall margin of safety for the basket.

More than a handful of large- and mid-cap companies had solid performances over the past year. Walgreen (NASDAQ: WBA  ) surged 41%, finally moving on from its now-resolved snit with pharmacy benefits manager Express Scripts. Its pharmacy volume is picking up, and it has invested heavily in international growth, via a purchase of Europe-based Alliance Boots. It has also entered into a promising alliance with U.S. drug wholesaler AmerisourceBergen (NYSE: ABC  ) .

Tyson Foods (NYSE: TSN  ) gained 25%, recently hitting a 52-week high despite margin compression due to rising prices. It also may be affected by Washington's sequester, which is furloughing USDA meat inspectors, which can slow down business -- though Tyson isn't too worried about that. Management is bullish for its longer-term prospects, and Tyson's forward P/E ratio of 9 is intriguing.

Other companies didn't do as well last year but could see their fortunes change in the coming years. Food giant Archer Daniels Midland (NYSE: ADM  ) gained 5%, but some analysts, such as those at BMO Capital Markets, see it as a bit overvalued now; BMO cut its rating to market perform. The company recently raised its dividend by 9%, and it now yields 2.3%. In February, it posted strong second-quarter results, despite weak corn processing numbers.

A market darling not so long ago, Green Mountain Coffee Roasters (UNKNOWN: GMCR.DL  ) added 3%. Investors have been worried about the patent expiration for its K-Cups, but the company has continued signing big deals with many major food names -- such as Lipton. (My colleague Alyce Lomax finds instant K-Cup servings of tea silly, though, as we've always had tea bags.)

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

With Green Mountain cheaper than it's ever been, many investors are wondering whether this is the end of the former market darling, or the perfect entry point for an enormous rebound. You can find our recommendation for how to play the company in our new premium research report. In it you'll find everything you need to know about Green Mountain, including whether it's a buy at today's prices. Click here for instant access.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2328836, ~/Articles/ArticleHandler.aspx, 9/29/2016 6:28:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,339.24 110.94 0.61%
S&P 500 2,171.37 11.44 0.53%
NASD 5,318.55 12.84 0.24%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 4:01 PM
ADM $41.85 Down -0.04 -0.10%
Archer Daniels Mid… CAPS Rating: ****
EWRI.DL $0.00 Down +0.00 +0.00%
Rydex Russell 1000… CAPS Rating: No stars
GMCR.DL $0.00 Down +0.00 +0.00%
Keurig Green Mount… CAPS Rating: **
TSN $76.02 Up +0.30 +0.40%
Tyson Foods CAPS Rating: ****
WBA $80.66 Down -0.31 -0.38%
Walgreens Boots Al… CAPS Rating: ****