MW This stock-market strategy is a smart way to play Micron and the memory-chip rally

By Philip van Doorn

Adding a value component and trimming back on the hottest growth stocks has served this growth ETF well over the long term and during the AI build-out

Micron's stock had more than tripled for 2026 through May 26, after returning 240% during 2025.

So far, 2026 has been a year of astounding gains for many stocks of semiconductor manufacturers. But a quick look at a few stock indexes might surprise you. And if you are pursuing a more aggressive growth-oriented index strategy, this might be a good time to consider an approach that pulls back a bit on the highfliers.

This chart shows year-to-date returns for the S&P 500 SPX, as well as the S&P 500 growth index and the Russell 1000 Growth Index RLG. All returns in this article include reinvested dividends.

The S&P 500's total return for 2026 through May 26 was 10.4%. The S&P 500 Growth Index was up 12.4% year-to-date, while the Russell 1000 Growth Index trailed with a 6.4% return.

Based on total returns with dividends reinvested, 17 stocks among the S&P 500 had at least doubled through May 26, while 46 were up at least 50% and 119 were up at least 20%, according to data provided by LSEG.

The S&P and Russell indexes are weighted by market capitalization. This means that success is rewarded and that the indexes will adjust toward the hottest stocks. Three companies (Nvidia (NVDA), Apple $(AAPL)$ and Microsoft (MSFT)) comprise 19.9% of the State Street S&P 500 ETF Trust SPY, the oldest exchange-traded fund that tracks the S&P 500 by holding all of its stocks.

The cap-weighting and resulting concentration aren't bad by definition, especially during bull markets. They have helped reward index-fund investors with an excellent performance over the past decade. Through Tuesday, the S&P 500's average annual return for 10 years was 15.6%, according to LSEG. Over the previous 10-year period, the average annual return for the index was 7.3%.

One more thing about the cap-weighting and this year's results so far: Microsoft makes up 4.8% of the SPY portfolio. It is the third-largest component of the S&P 500 by market cap. But at the end of 2025, Microsoft made up 6.2% of the SPY portfolio, according to LSEG. Microsoft's weighting has declined because its stock has pulled back 13.6% this year, which helps explain why the S&P 500's performance hasn't been very strong when compared with the 89% year-to-date return for the iShares Semiconductor ETF SOXX, which tracks the NYSE Semiconductor Index of 30 stocks.

High growth, cyclicality and a related warning

If you are investing in growth index funds, your approach will be more concentrated because these funds begin with a smaller number of stocks. Growth stocks are typically considered those of companies that are expanding their businesses rapidly. Valuations in the growth camp might be high relative to profit or revenue, but this isn't always the case.

Stocks in the value camp are typically those of more mature companies that are growing slowly, and/or trade at low multiples to earnings or feature high dividend yields. A high dividend yield or low valuation might appeal to you as an investor, but you will then be best served by doing some research. Either might signal a "value trap," or other concerns among enough investors to explain the low share price.

A stock with a high dividend yield might be considered a value trap because investors expect the dividend to be cut. Or a stock with a low price/earnings ratio may include another type of warning. For a growth-oriented example, Micron's $(MU)$ stock has more than tripled this year (following a 240% return in 2025), as its memory components designed to support graphics processing units made by Nvidia to support AI technology have been widely adopted by data centers.

But Micron might still be considered to be a cheap stock. It trades at 10 times the consensus earnings-per-share estimate among analysts polled by LSEG. That compares with a weighted forward P/E of 20.9 for the S&P 500, 23.9 for the S&P 500's information technology sector and 28.7 for the iShares Semiconductor ETF, as calculated by LSEG.

Steve Goldstein: How AI compares to 11 other capital-spending explosions: When they bust - and boom again

For its most recent reported fiscal quarter ended Feb. 26, Micron reported sales of $23.86 billion, increasing 75% from $13.64 billion the previous quarter and nearly tripling sales of $8.05 billion during the year-earlier quarter.

Micron's fiscal 2026 ends late in August. Analysts expect the company's revenue for fiscal 2026 to total $109.30 billion, increasing to $178.68 billion in fiscal 2027 and then growing at a much slower pace to $181.71 in fiscal 2028. The consensus among analysts is for earnings per share to total $57.78 for fiscal 2026, increasing to $100.80 in fiscal 2027 and then declining a bit to $94.74 in 2028.

The company's stellar growth path is expected to continue for some time. But Micron's business has traditionally been cyclical. Analysts expect the current cycle to simmer during Micron's fiscal 2028, which ends in August 2028. Looking back, Micron's sales declined 49% and the company lost $5.34 a share in fiscal 2023, during the most recent downcycle for the computer memory and storage industry.

A growth approach that keeps trimming Micron and other stocks that pop

The Invesco Large Cap Growth ETF PWB is an index fund, established in March 2005, designed to act similarly to that of an active money manager, according to Nick Kalivas, Invesco's head of ETF factor strategy.

During an interview with MarketWatch, Kalivas explained that this was a combined strategy for PWB and its sister fund, the Invesco Large Cap Value ETF PWV, to screen the largest 250 U.S. stocks quarterly.

"The methodology was to think as an active manager would, but make it systematic in an index form," Kalivas said.

PWB tracks the Dynamic Large Cap Growth Intellidex Index, which is maintained by ICE Data Indices. The index and PWB are reconstituted quarterly on the second business day following the last Friday of each February, May, August and November.

Every quarter, the index provider begins with the 250 largest stocks by market cap listed on the New York Stock Exchange or the Nasdaq exchange and scores them on value and growth factors to arrive at two exclusive lists of 100 growth and 100 value stocks.

The 100 identified growth stocks have been narrowed down using screens that factor in price momentum, earnings momentum, quality (which includes levels of debt), management action (including dividends and stock buybacks), and then a value screen (even though this is a growth-stock list). All of that together narrows the list to 50 stocks.

At the end of this quarterly process, the 50 stocks are weighted for the index and the PWB portfolio so that the 15 largest by market cap have a combined 50% weighting, with each of those stocks having a 3.33% weighting. Then the remaining 35 stocks are weighted equally.

Micron currently makes up 6.1% of the PWB portfolio. That's up from 3.33% when the fund was reconstituted early in March and 4.1% as of Dec. 31. When the fund is next reconstituted, Micron's weighting will be reduced again to 3.33% next week, assuming it passes all the screens to remain in the fund, Kalivas said.

So despite cutting back on its Micron holdings, PWB has outperformed its benchmark, the Russell 1000 Growth Index, as well as the S&P 500, by wide margins this year, as you can see in the chart above. During 2025, PWB returned 24.9%, ahead of an 18.6% return for the Russell 1000 Growth Index and 17.9% for the S&P 500.

This strategy adds momentum and value factors to a growth-oriented index strategy, while "you might throttle back a bit on valuations that get high," Kalivas said.

Performance against peers

All investment returns in this article are net of expenses, which in the case of the Invesco Large Cap Growth ETF, come to 0.55% of assets, or $55 a year for a $10,000 investment.

LSEG lists a large number of exchange-traded funds as peers for PWB with performance figures through the end of April.

For the following comparison, we cut LSEG's list to eight ETFs launched at least 10 years ago and benchmarked either to the Russell 1000 Growth Index or the S&P 500 Growth Index.

The first competitor on the list is the iShares Russell 1000 Growth ETF IWF, which tracks the Russell 1000 Growth Index. The remaining seven funds are then sorted by their average annual returns over the past 10 years through April:

   ETF                                                1-year return  3-year avg. return  5-year avg. return  10-year avg. return  Expense ratio 
   Invesco Large Cap Growth ETF                               46.8%               30.9%               15.7%                17.3%          0.55% 
   iShares Russell 1000 Growth                                30.4%               25.2%               13.6%                18.0%          0.18% 
   Franklin Focused Growth ETF                                32.3%               28.3%               10.5%                18.0%          0.55% 
   State Street SPDR Portfolio S&P 500 Growth ETF             37.7%               26.9%               14.2%                17.6%          0.04% 
   Fidelity Enhanced Large Cap Growth ETF                     31.9%               25.5%               14.1%                17.6%          0.18% 
   iShares S&P 500 Growth ETF                                 37.5%               26.8%               14.0%                17.5%          0.18% 
   Goldman Sachs Growth Opportunities ETF                     33.5%               25.4%               12.0%                17.2%          0.45% 
   Columbia Large Cap Growth ETF                              27.3%               24.2%               13.3%                16.9%          0.35% 
   Touchstone Large Company Growth ETF                        26.2%               22.7%               10.3%                15.8%          0.82% 

MW This stock-market strategy is a smart way to play Micron and the memory-chip rally

By Philip van Doorn

Adding a value component and trimming back on the hottest growth stocks has served this growth ETF well over the long term and during the AI build-out

Micron's stock had more than tripled for 2026 through May 26, after returning 240% during 2025.

So far, 2026 has been a year of astounding gains for many stocks of semiconductor manufacturers. But a quick look at a few stock indexes might surprise you. And if you are pursuing a more aggressive growth-oriented index strategy, this might be a good time to consider an approach that pulls back a bit on the highfliers.

This chart shows year-to-date returns for the S&P 500 SPX, as well as the S&P 500 growth index and the Russell 1000 Growth Index RLG. All returns in this article include reinvested dividends.

The S&P 500's total return for 2026 through May 26 was 10.4%. The S&P 500 Growth Index was up 12.4% year-to-date, while the Russell 1000 Growth Index trailed with a 6.4% return.

Based on total returns with dividends reinvested, 17 stocks among the S&P 500 had at least doubled through May 26, while 46 were up at least 50% and 119 were up at least 20%, according to data provided by LSEG.

The S&P and Russell indexes are weighted by market capitalization. This means that success is rewarded and that the indexes will adjust toward the hottest stocks. Three companies (Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT)) comprise 19.9% of the State Street S&P 500 ETF Trust SPY, the oldest exchange-traded fund that tracks the S&P 500 by holding all of its stocks.

The cap-weighting and resulting concentration aren't bad by definition, especially during bull markets. They have helped reward index-fund investors with an excellent performance over the past decade. Through Tuesday, the S&P 500's average annual return for 10 years was 15.6%, according to LSEG. Over the previous 10-year period, the average annual return for the index was 7.3%.

One more thing about the cap-weighting and this year's results so far: Microsoft makes up 4.8% of the SPY portfolio. It is the third-largest component of the S&P 500 by market cap. But at the end of 2025, Microsoft made up 6.2% of the SPY portfolio, according to LSEG. Microsoft's weighting has declined because its stock has pulled back 13.6% this year, which helps explain why the S&P 500's performance hasn't been very strong when compared with the 89% year-to-date return for the iShares Semiconductor ETF SOXX, which tracks the NYSE Semiconductor Index of 30 stocks.

High growth, cyclicality and a related warning

If you are investing in growth index funds, your approach will be more concentrated because these funds begin with a smaller number of stocks. Growth stocks are typically considered those of companies that are expanding their businesses rapidly. Valuations in the growth camp might be high relative to profit or revenue, but this isn't always the case.

Stocks in the value camp are typically those of more mature companies that are growing slowly, and/or trade at low multiples to earnings or feature high dividend yields. A high dividend yield or low valuation might appeal to you as an investor, but you will then be best served by doing some research. Either might signal a "value trap," or other concerns among enough investors to explain the low share price.

A stock with a high dividend yield might be considered a value trap because investors expect the dividend to be cut. Or a stock with a low price/earnings ratio may include another type of warning. For a growth-oriented example, Micron's (MU) stock has more than tripled this year (following a 240% return in 2025), as its memory components designed to support graphics processing units made by Nvidia to support AI technology have been widely adopted by data centers.

But Micron might still be considered to be a cheap stock. It trades at 10 times the consensus earnings-per-share estimate among analysts polled by LSEG. That compares with a weighted forward P/E of 20.9 for the S&P 500, 23.9 for the S&P 500's information technology sector and 28.7 for the iShares Semiconductor ETF, as calculated by LSEG.

Steve Goldstein: How AI compares to 11 other capital-spending explosions: When they bust - and boom again

For its most recent reported fiscal quarter ended Feb. 26, Micron reported sales of $23.86 billion, increasing 75% from $13.64 billion the previous quarter and nearly tripling sales of $8.05 billion during the year-earlier quarter.

Micron's fiscal 2026 ends late in August. Analysts expect the company's revenue for fiscal 2026 to total $109.30 billion, increasing to $178.68 billion in fiscal 2027 and then growing at a much slower pace to $181.71 in fiscal 2028. The consensus among analysts is for earnings per share to total $57.78 for fiscal 2026, increasing to $100.80 in fiscal 2027 and then declining a bit to $94.74 in 2028.

The company's stellar growth path is expected to continue for some time. But Micron's business has traditionally been cyclical. Analysts expect the current cycle to simmer during Micron's fiscal 2028, which ends in August 2028. Looking back, Micron's sales declined 49% and the company lost $5.34 a share in fiscal 2023, during the most recent downcycle for the computer memory and storage industry.

A growth approach that keeps trimming Micron and other stocks that pop

The Invesco Large Cap Growth ETF PWB is an index fund, established in March 2005, designed to act similarly to that of an active money manager, according to Nick Kalivas, Invesco's head of ETF factor strategy.

During an interview with MarketWatch, Kalivas explained that this was a combined strategy for PWB and its sister fund, the Invesco Large Cap Value ETF PWV, to screen the largest 250 U.S. stocks quarterly.

"The methodology was to think as an active manager would, but make it systematic in an index form," Kalivas said.

PWB tracks the Dynamic Large Cap Growth Intellidex Index, which is maintained by ICE Data Indices. The index and PWB are reconstituted quarterly on the second business day following the last Friday of each February, May, August and November.

Every quarter, the index provider begins with the 250 largest stocks by market cap listed on the New York Stock Exchange or the Nasdaq exchange and scores them on value and growth factors to arrive at two exclusive lists of 100 growth and 100 value stocks.

The 100 identified growth stocks have been narrowed down using screens that factor in price momentum, earnings momentum, quality (which includes levels of debt), management action (including dividends and stock buybacks), and then a value screen (even though this is a growth-stock list). All of that together narrows the list to 50 stocks.

At the end of this quarterly process, the 50 stocks are weighted for the index and the PWB portfolio so that the 15 largest by market cap have a combined 50% weighting, with each of those stocks having a 3.33% weighting. Then the remaining 35 stocks are weighted equally.

Micron currently makes up 6.1% of the PWB portfolio. That's up from 3.33% when the fund was reconstituted early in March and 4.1% as of Dec. 31. When the fund is next reconstituted, Micron's weighting will be reduced again to 3.33% next week, assuming it passes all the screens to remain in the fund, Kalivas said.

So despite cutting back on its Micron holdings, PWB has outperformed its benchmark, the Russell 1000 Growth Index, as well as the S&P 500, by wide margins this year, as you can see in the chart above. During 2025, PWB returned 24.9%, ahead of an 18.6% return for the Russell 1000 Growth Index and 17.9% for the S&P 500.

This strategy adds momentum and value factors to a growth-oriented index strategy, while "you might throttle back a bit on valuations that get high," Kalivas said.

Performance against peers

All investment returns in this article are net of expenses, which in the case of the Invesco Large Cap Growth ETF, come to 0.55% of assets, or $55 a year for a $10,000 investment.

LSEG lists a large number of exchange-traded funds as peers for PWB with performance figures through the end of April.

For the following comparison, we cut LSEG's list to eight ETFs launched at least 10 years ago and benchmarked either to the Russell 1000 Growth Index or the S&P 500 Growth Index.

The first competitor on the list is the iShares Russell 1000 Growth ETF IWF, which tracks the Russell 1000 Growth Index. The remaining seven funds are then sorted by their average annual returns over the past 10 years through April:

   ETF                                                1-year return  3-year avg. return  5-year avg. return  10-year avg. return  Expense ratio 
   Invesco Large Cap Growth ETF                               46.8%               30.9%               15.7%                17.3%          0.55% 
   iShares Russell 1000 Growth                                30.4%               25.2%               13.6%                18.0%          0.18% 
   Franklin Focused Growth ETF                                32.3%               28.3%               10.5%                18.0%          0.55% 
   State Street SPDR Portfolio S&P 500 Growth ETF             37.7%               26.9%               14.2%                17.6%          0.04% 
   Fidelity Enhanced Large Cap Growth ETF                     31.9%               25.5%               14.1%                17.6%          0.18% 
   iShares S&P 500 Growth ETF                                 37.5%               26.8%               14.0%                17.5%          0.18% 
   Goldman Sachs Growth Opportunities ETF                     33.5%               25.4%               12.0%                17.2%          0.45% 
   Columbia Large Cap Growth ETF                              27.3%               24.2%               13.3%                16.9%          0.35% 
   Touchstone Large Company Growth ETF                        26.2%               22.7%               10.3%                15.8%          0.82% 

(MORE TO FOLLOW) Dow Jones Newswires

May 27, 2026 11:19 ET (15:19 GMT)

MW This stock-market strategy is a smart way to -2-

                                                                                                                                   Source: LSEG 

PWB leads for one-three- and five-year returns, while ranking sixth for 10 years.

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May 27, 2026 11:19 ET (15:19 GMT)

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