Alpha Power Investing Newsletter

December 1, 2017

The Power of Mid-Caps
The Alpha Mid-Cap Power Index strategy and The Formula both hold the S&P MidCap 400 Index during a time of year we refer to as the "Power Zone". This period extends from the first trading day of November through the last trading day of the following May. There is a very specific reason why we focus our attention in the Mid-Cap space.
For our purposes we will look at the year-to-year and cumulative returns generated by Mid-Cap stocks during the "Power Zone" period versus a variety of other major market indexes. The indexes we will consider are:
  • S&P MidCap 400 Index (Ticker MID; Mid-Cap stocks)
  • S&P 500 Index (Ticker SPX; Large-Cap stocks)
  • Russell 2000 Index (Ticker RUT; Small-Cap stocks)
  • Nasdaq Composite Index (Ticker COMPQ; Nasdaq stocks)
  • Wilshire 5000 (Broadly-based index of 5000 stocks)
The S&P 500 Index is the most widely recognized large-cap index, the Russell 2000 Index is the most widely recognized small-cap index, the Nasdaq Composite Index represents all stocks listed on the Nasdaq exchange, and the Wilshire 5000 is the most widely recognized measure of broad market performance as it includes 5000 stocks of all shapes and sizes in the index. Monthly total return data for each index starting in November 1981 is obtained from the PEP Database compiled by Callan Associates.
Figure 1 displays the cumulative % growth for each index only during the November through May "Power Zone" period of each year starting in 1981.
As you can see in Figure 1, the S&P Mid-Cap 400 Index has far outperformed the other indexes with the Russell 2000 being the only index that comes anywhere close to the Mid-Cap Index in terms of overall performance. Figure 2 displays some of the key performance measures for each index.
In Figure 2 we find that the S&P MidCap 400 Index has the highest average, median and cumulative percentage gains, the greatest number of "Up" periods (32 out of 36 years) and outperformed each of the other indexes anywhere from 56% of the time (versus the Nasdaq Composite) to 69% of the time (versus the Wilshire 5000).
In sum, over the course of any year or period of several years, another index may outperform the S&P MidCap 400 Index. But 36 years of history clearly point to the Mid-Caps as the preferred index to utilize for investors seeking to maximize the tradeoff between reward and risk during the November to May "Power Zone".
To read more about Alpha's strategies, please go to the Strategies and Performance page of our website at to read the brochures and view the actual performance results.
Jay Kaeppel
Vice President and Director of Research
Alpha Investment Management, Inc.

Disclosures: Past performance is not a guarantee of future performance. Indexes are not investment vehicles. The returns illustrated above are not returns of any Alpha strategy and do not include management fees or the cost of funds, trading, or other expenses. To see the impact of these costs, please refer to the net of fees and expenses performance data for specific Alpha strategies. The illustrations above are designed to quantify the effect of certain time periods on representative market indexes. The data used to construct the illustrations were obtained from third-party sources. While Alpha believes the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.

Alpha Investment Management, Inc. is a SEC registered investment advisor. Such registration does not imply a certain skill or training and no inference to the contrary should be made. The information and opinions expressed in this document are for informational purposes only. Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

© 2017 Alpha Investment Management, Inc.

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