Mid-caps outperform blue chip rivals
Mid-sized firms boast stronger sales and profit growth than FTSE 100 rivals.
Britain's mid-sized firms continue to significantly outperform their so-called 'blue chip' rivals in the FTSE 100.
That's according to the latest quarterly Profit Watch UK report from The Share Centre, which analyses data from the financial reports of the UK’s 350 largest listed companies. Researchers then compile data for the whole market and by sector and index.
The latest release was something of a mixed bag, thanks to weakness among FTSE 100 firms. The Share Centre reported that FTSE members saw their collective sales slide to £61.9 billion, a fall of 5.8%. However, mid-caps (members of the FTSE 250 index) saw their sales leap by 11.3% to £32 billion.
When it came to second-quarter profits, mid-caps also showed significantly stronger growth than their blue-chip counterparts. FTSE 250 firms reported net protfits of £2.2 billion, up a whopping 28.5% year-on-year, compared to an 11.9% rise to £11.9 billion from the blue chips.
The FTSE 250 races away
Since the global financial crisis, the FTSE 250 index has raced away from the FTSE 100. Over the past five years, the FTSE 250 index is up a whopping 70.4%, standing at 15,483.7 at the time of writing. In contrast, the FTSE100 is up a mere 28.1% since mid-November 2009 and stands at 6,587.6 at the time of writing.
Adding in higher dividends from FTSE 100 firms will rebalance this result somewhat, but it is quite clear that mid-caps have been the place to invest during the UK's post-crash recovery.
How to buy into mid-cap growth
What can you do if you want to share in the success of domestically sensitive UK companies by taking a stake in the FTSE 350 index?
Thanks to a price war among providers of index trackers and ETFs (exchange-traded funds), it's a piece of cake for UK investors to find an ultra-low-cost FTSE 100 tracker fund. Alas, the same cannot be said for mid-cap index trackers, where choice is sparse and tracker fees considerably higher.
According to investment-research website Trustnet, there are three FTSE 250-focused funds open to retail investors, which I've detailed below:
|
Fund name |
Ongoing Charges figure |
Unit price (bid/offer) |
Dividend yield |
Five-year return |
|
HSBC FTSE 250 Index C Inc |
0.17% |
143.80p |
2.52% |
91.3% |
|
Schroder UK Mid 250 A Acc |
1.66% |
210.9/213.2p |
0.29% |
93.1% |
|
Threadneedle UK Mid 250 Ret Acc |
1.63% |
186.56p |
1.70% |
91.0% |
Note the wide difference between the fund fees charged by these three funds. The HSBC fund is an index tracker, while the Schroder and Threadneedle funds are both managed funds, with hefty charges to match.
When it comes to company results and share prices, big hasn't been beautiful over the past five years. Instead, mid-cap firms in the FTSE 250 have seen their sales, profits and share prices surge past those of their blue-chip rivals. If you want to jump aboard this recovery bandwagon, then a FTSE 250 tracker or managed fund might be just what you're looking for.
More on investing:
Beginner's guide to buying and selling shares
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