QUAL vs. MDY: What’s The Difference?

The iShares MSCI USA Quality Factor ETF (QUAL) and the SPDR S&P MIDCAP 400 ETF Trust (MDY) are both among the Top 100 ETFs. QUAL is a iShares Large Blend fund and MDY is a SPDR State Street Global Advisors Mid-Cap Blend fund. So, what’s the difference between QUAL and MDY? And which fund is better?

The expense ratio of QUAL is 0.08 percentage points lower than MDY’s (0.15% vs. 0.23%). QUAL also has a higher exposure to the technology sector and a lower standard deviation. Overall, QUAL has provided higher returns than MDY over the past 7 years.

In this article, we’ll compare QUAL vs. MDY. We’ll look at industry exposure and portfolio growth, as well as at their risk metrics and fund composition. Moreover, I’ll also discuss QUAL’s and MDY’s holdings, annual returns, and performance and examine how these affect their overall returns.

Summary

QUAL MDY
Name iShares MSCI USA Quality Factor ETF SPDR S&P MIDCAP 400 ETF Trust
Category Large Blend Mid-Cap Blend
Issuer iShares SPDR State Street Global Advisors
AUM 23.93B 21.31B
Avg. Return 13.42% 13.29%
Div. Yield 1.29% 0.94%
Expense Ratio 0.15% 0.23%

The iShares MSCI USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) is a Mid-Cap Blend fund that is issued by SPDR State Street Global Advisors. It currently has 21.31B total assets under management and has yielded an average annual return of 13.29% over the past 10 years. The fund has a dividend yield of 0.94% with an expense ratio of 0.23%.

QUAL’s dividend yield is 0.35% higher than that of MDY (1.29% vs. 0.94%). Also, QUAL yielded on average 0.13% more per year over the past decade (13.42% vs. 13.29%). The expense ratio of QUAL is 0.08 percentage points lower than MDY’s (0.15% vs. 0.23%).

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Fund Composition

Industry Exposure

QUAL vs. MDY - Industry Exposure

QUAL MDY
Technology 22.52% 14.74%
Industrials 9.22% 17.88%
Energy 2.24% 2.52%
Communication Services 11.44% 1.63%
Utilities 2.41% 2.84%
Healthcare 13.22% 11.17%
Consumer Defensive 8.57% 4.2%
Real Estate 2.72% 9.66%
Financial Services 15.87% 15.2%
Consumer Cyclical 9.43% 14.89%
Basic Materials 2.35% 5.27%

The iShares MSCI USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has the most exposure to the Industrials sector at 17.88%. This is followed by Financial Services and Consumer Cyclical at 15.2% and 14.89% respectively. Energy (2.52%), Utilities (2.84%), and Consumer Defensive (4.2%) only make up 9.56% of the fund’s total assets.

MDY’s mid-section with moderate exposure is comprised of Basic Materials, Real Estate, Healthcare, Technology, and Consumer Cyclical stocks at 5.27%, 9.66%, 11.17%, 14.74%, and 14.89%.

QUAL is 7.78% more exposed to the Technology sector than MDY (22.52% vs 14.74%). QUAL’s exposure to Financial Services and Healthcare stocks is 0.67% higher and 2.05% higher respectively (15.87% vs. 15.2% and 13.22% vs. 11.17%). In total, Basic Materials, Utilities, and Real Estate also make up 10.29% less of the fund’s holdings compared to MDY (7.48% vs. 17.77%).

Holdings

QUAL - Holdings

QUAL Holdings Weight
Facebook Inc Class A 4.77%
Nike Inc Class B 4.05%
Microsoft Corp 3.54%
Apple Inc 3.52%
Johnson & Johnson 2.99%
BlackRock Inc 2.87%
Target Corp 2.8%
Mastercard Inc Class A 2.72%
NVIDIA Corp 2.71%
Alphabet Inc Class A 2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

MDY - Holdings

MDY Holdings Weight
Bio-Techne Corp 0.75%
Molina Healthcare Inc 0.63%
Cognex Corp 0.63%
Fair Isaac Corp 0.62%
XPO Logistics Inc 0.61%
SolarEdge Technologies Inc 0.61%
Signature Bank 0.6%
Graco Inc 0.55%
Camden Property Trust 0.55%
FactSet Research Systems Inc 0.54%

MDY’s Top Holdings are Bio-Techne Corp, Molina Healthcare Inc, Cognex Corp, Fair Isaac Corp, and XPO Logistics Inc at 0.75%, 0.63%, 0.63%, 0.62%, and 0.61%.

SolarEdge Technologies Inc (0.61%), Signature Bank (0.6%), and Graco Inc (0.55%) have a slightly smaller but still significant weight. Camden Property Trust and FactSet Research Systems Inc are also represented in the MDY’s holdings at 0.55% and 0.54%.

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Risk Analysis

QUAL MDY
Mean Return 0 1.08
R-squared 0 86.66
Std. Deviation 0 16.83
Alpha 0 -4.1
Beta 0 1.15
Sharpe Ratio 0 0.73
Treynor Ratio 0 9.97

The iShares MSCI USA Quality Factor ETF (QUAL) has a Mean Return of 0 with a Alpha of 0 and a Treynor Ratio of 0. Its Standard Deviation is 0 while QUAL’s Beta is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a R-squared of 0.

The SPDR S&P MIDCAP 400 ETF Trust (MDY) has a R-squared of 86.66 with a Standard Deviation of 16.83 and a Sharpe Ratio of 0.73. Its Mean Return is 1.08 while MDY’s Treynor Ratio is 9.97. Furthermore, the fund has a Beta of 1.15 and a Alpha of -4.1.

QUAL’s Mean Return is 1.08 points lower than that of MDY and its R-squared is 86.66 points lower. With a Standard Deviation of 0, QUAL is slightly less volatile than MDY. The Alpha and Beta of QUAL are 4.10 points higher and 1.15 points lower than MDY’s Alpha and Beta.

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Performance

Annual Returns

QUAL vs. MDY - Annual Returns

Year QUAL MDY
2020 16.96% 13.51%
2019 34.14% 25.86%
2018 -5.77% -11.28%
2017 22.26% 15.89%
2016 9.18% 20.33%
2015 5.56% -2.4%
2014 11.62% 9.42%
2013 0.0% 33.08%
2012 0.0% 17.58%
2011 0.0% -1.99%
2010 0.0% 26.17%

QUAL had its best year in 2019 with an annual return of 34.14%. QUAL’s worst year over the past decade yielded -5.77% and occurred in 2018. In most years the iShares MSCI USA Quality Factor ETF provided moderate returns such as in 2010, 2015, and 2016 where annual returns amounted to 0.0%, 5.56%, and 9.18% respectively.

The year 2013 was the strongest year for MDY, returning 33.08% on an annual basis. The poorest year for MDY in the last ten years was 2018, with a yield of -11.28%. Most years the SPDR S&P MIDCAP 400 ETF Trust has given investors modest returns, such as in 2020, 2017, and 2012, when gains were 13.51%, 15.89%, and 17.58% respectively.

Portfolio Growth

QUAL vs. MDY - Portfolio Growth

Fund Initial Balance Final Balance CAGR
QUAL $10,000 $23,251 13.42%
MDY $10,000 $18,875 13.29%

A $10,000 investment in QUAL would have resulted in a final balance of $23,251. This is a profit of $13,251 over 7 years and amounts to a compound annual growth rate (CAGR) of 13.42%.

With a $10,000 investment in MDY, the end total would have been $18,875. This equates to a $8,875 profit over 7 years and a compound annual growth rate (CAGR) of 13.29%.

QUAL’s CAGR is 0.13 percentage points higher than that of MDY and as a result, would have yielded $4,376 more on a $10,000 investment. Thus, QUAL outperformed MDY by 0.13% annually.


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