Prediction: This Vanguard ETF Will Outperform the S&P 500 Over the Next 12 Months

Core Viewpoint - Mid-cap stocks, defined as having market values between $2 billion and $10 billion, are currently overlooked compared to their larger and smaller counterparts, particularly as mega-cap growth stocks dominate the market narrative [1][2]. Group 1: Mid-Cap Performance - Despite a lack of enthusiasm from investors, mid-cap stocks are poised to outperform the S&P 500 over the next year, with the Vanguard Mid-Cap Growth ETF (VOT) being highlighted as a favorable investment option [2]. - Over the three years ending October 22, the S&P MidCap 400 Index returned 48%, which is significantly lower than the returns of large-cap stocks [3]. Group 2: Sector Composition - The underperformance of mid-caps can be attributed to their cyclical nature and limited exposure to technology stocks, with VOT having a 19.60% weight in tech compared to 12.60% for the Vanguard Mid-Cap ETF (VO) [5]. - The tech exposure has benefited VOT, which returned 72.6% over the past three years, outperforming both VO and the S&P MidCap 400 [5]. Group 3: Market Capitalization Dynamics - VOT's holdings reflect a broader definition of mid-cap, with its largest holding, Robinhood Markets, having a market cap of $117.2 billion, indicating that VOT is more focused on medium-sized companies [6]. - The median market cap of VOT's 121 holdings is $45.7 billion, which exceeds traditional mid-cap definitions, as VOT targets the 70th to 85th percentile of the domestic equity market by market value [7]. Group 4: Investment Outlook - There is a potential for mid-caps to regain investor interest, and VOT may represent a safer investment compared to small-cap funds [8].