Invesco Zacks Mid-Cap ETF

CZA

Market cap $181M

The new year is poised for a resurgence in tech IPOs, as lower interest rates and an investor shift to small- and mid-cap companies combine to create a more welcoming market for debuts. The current environment presents the most favorable conditions for the recovery of IPOs in the past three years. The S&P 400 Midcap Index and the S&P 600 Index have outperformed the S&P 500 Index since the US election Nov. 5.

Zacks Investment Research seeks to leverage the expertise of thousands of Wall Street researchers, reasoning that its clients can gain a competitive edge by following analyst upgrades and downgrades. CZA aims to fully replicate the Zacks Mid Cap Core Index. However, I was surprised to find the Index does a poor job selecting stocks with strong earnings sentiment. My analysis revealed passive mid-cap funds like IWR, IJH, IMCB, and VO had stronger earnings momentum, and that CZA's constituents barely beat sales expectations last quarter.

US equities, as measured by the S&P 500 Index, have performed strongly so far in 2023.