JPMorgan Fundamental Data Science Mid Core ETF (MCDS)

ETF JPMorgan Fundamental Data Science Mid Core ETF (JMID)

Profile

JMID seeks to provide long-term capital appreciation by investing primarily in equity securities of US mid-cap companies. The ETF employs a quantitative data science model that selects companies based on financial factors, valuation, quality and momentum signals. It utilizes an active management approach, and is not designed to track any particular index.

Objective

JMID targets a total return consistent with that of the US mid-cap market, while striving to achieve alpha by actively managing the portfolio.

Issuer:

JPMorgan Chase & Co.

• Reputation and reliability: Widely recognized as a global leader in financial services with strong track record and reputation.
• Management: Experienced team with expertise in data-driven investing and asset allocation.

Market Share:

• Small - Less than 0.5% of the US Mid Cap Equity ETF market.
• Launched on October 13, 2022, it is a relatively new fund with still-growing assets.

Total Net Assets:

• $26.36 million as of Oct 31, 2023.

Moat:

• Proprietary Data Science Model: JMID leverages JPMorgan’s proprietary AI and data science capabilities, potentially offering an edge in selecting stocks.
• Active management: Can make dynamic adjustments to the portfolio to navigate changing market conditions.

Financial Performance:

• Relatively short track record considering the recent launch.
• YTD performance (Oct 31, 2023) -8.4%, below the S&P MidCap 400 Index -5.1%.

Growth Trajectory:

• Assets are showing early growth, though the ETF's success will depend on its ability to consistently generate alpha in the mid-cap space.

Liquidity:

• Average trading volume: data currently limited due to the short history.
• Bid-Ask Spread: Tight spread indicating good liquidity.

Market Dynamics:

• Fluctuations in US mid-cap company valuations.
• Economic conditions and interest rate movements
• Competition within the actively managed mid-cap ETF space.

Competitors:

• iShares Core S&P Mid-Cap ETF (IJH): 94.3% market share
• Vanguard Mid-Cap Index Fund ETF (VO): 4.4% market share
• Schwab Total Stock Market Mid-Cap Index (SCHM): 1.0%

Expense Ratio:

• 0.35%

Investment Approach and Strategy:

• Strategy: Active management based on its data-driven model, focusing on US Mid Cap companies.
• Composition: Primarily holds equities of US mid-cap companies across different sectors, with no sector exceeding 25% weight in the portfolio.

Key Points:

• Aims for alpha generation through data science-powered stock selection.
• Actively managed, not passively tracking an index.
• Offers exposure to US mid-cap equities with potential for long-term growth.
• Relatively young fund with limited performance history.

Risks:

• Volatility: Mid-cap stocks are generally more volatile than large-cap stocks.
• Model Risk: Reliance on the data science model creates potential for deviations from expected outcomes.
• Market risk: Performance is tied to the performance of the underlying mid-cap companies.

Who Should Consider Investing?

• Investors seeking long-term growth potential with potential alpha generation.
• Investors comfortable with the volatility of the mid-cap space.
• Investors confident in JMID’s data science-driven approach.

Fundamental Rating Based on AI (Scale 1-10):

7.5

Justification:

• JMID benefits from a strong issuer and a unique data-driven approach.
• However, its short track record, relatively small size, and dependence on a new model introduce uncertainties.
• Future success hinges on the model's effectiveness and the ETF’s ability to consistently outperform its benchmark.

Resources:

• https://am.jpmorgan.com/us/en/asset-management/gim/adv/etf/insights/etf-fundamental-data-science-mid-core
• https://www.jpmorgan.com/country/US/en/jpmorgan-fundamental-data-science-mid-core-etf
• https://www.wsj.com/pro/etf/ETF/overview.html?symb=JMID
• https://finance.yahoo.com/quote/JMID?p=JMID
• https://finance.yahoo.com/quote/IJH/

Disclaimer: This analysis should not be considered financial advice. Past performance does not guarantee future results. Investors are encouraged to conduct thorough research and due diligence before making any investment decisions.