Many investors tend to focus on large-cap stocks for their perceived stability and established operations, mid-cap stocks offer a unique balance of growth potential and risk. These stocks, representing companies with market capitalizations between $2 billion and $10 billion, combine growth potential with relative stability.
In this post, we’ll explore what mid-cap stocks are, and their benefits, and highlight five top mid-cap stocks to consider in 2024.
What Are Mid-Cap Stocks?
Mid-cap stocks are shares of companies that haven’t yet achieved the size and stability of large-cap stocks but have outgrown the nascent phase of small-cap stocks. These companies typically have a market capitalization ranging from approximately $2 billion to $10 billion. They often possess a well-established business model and a solid foothold in their industries, positioning them for continued growth and expansion.
Mid-cap stocks offer a middle ground in terms of risk and reward. They are generally less risky and volatile than small-cap stocks but have greater growth potential than large-cap stocks. This balance makes them an attractive option for investors seeking a mix of stability and growth.
Two primary benchmark indexes track mid-cap stocks:
- S&P MidCap 400 Index: This index tracks the performance of 400 mid-sized U.S. companies with valuations between about $2 billion and $8 billion.
- Russell Midcap Index: This index tracks over 800 companies and is a subset of the larger Russell 1000. The median market cap of companies in this index was $8.8 billion as of November 2022.
Benefits of Investing in Mid-Cap Stocks
Investing in mid-cap stocks offers several advantages that make them an appealing choice for many investors:
- Ease of Growth: Mid-cap companies often find it easier to raise capital compared to small-cap companies. This access to finance enhances their potential for growth and expansion, providing investors with significant upside opportunities.
- Return Potential: Positioned in the middle of the growth spectrum, mid-cap companies have room for value appreciation. They often offer substantial dividends as well, providing a steady income stream along with capital gains.
- Under-the-Radar Opportunities: Mid-cap stocks are not always the focus of large institutions and seasoned investors. This limited attention can lead to lower pricing, making these stocks more affordable. Savvy investors who identify undervalued mid-cap stocks can enjoy substantial returns as these companies gain recognition and analysis.
- Availability of Information: Unlike small-cap companies, mid-cap companies provide ample information regarding their financial health and history. This transparency makes it easier for investors to analyze their growth potential and profitability, facilitating informed investment decisions.
- Diversification: Mid-cap stocks offer a balance between the stability of large-caps and the growth potential of small-caps. Including them in an investment portfolio can enhance diversification, reducing overall risk while still providing opportunities for significant returns.
5 Best Mid-Cap Stocks to Buy in 2024
Here are five high-potential mid-cap stocks to consider for your investment portfolio in 2024:
1. Cava Group Inc. (NYSE: CAVA)
Cava Group owns and operates a chain of Mediterranean-inspired restaurants across the U.S. With a market value of $9.4 billion over 300 stores and a growing grocery store presence for its dips, spreads, and dressings, Cava is expanding rapidly. Analysts expect significant revenue growth, with projections of 20% in 2024 and 19% in 2025. The company is also profitable, making it a solid investment choice.
2. Oscar Health Inc. (NYSE: OSCR)
Oscar Health, known for its individual and small-group market plans, is experiencing widespread adoption. With a market value of $4.8 billion and over 1.4 million members across 20 states and nearly $6 billion in annual revenue, the company reported a 46% increase in revenue in the first quarter of 2024. This growth potential makes Oscar an attractive mid-cap stock for investors seeking exposure to the healthcare sector.
3. Powell Industries Inc. (NASDAQ: POWL)
Powell Industries designs and sells custom-engineered electrical systems, including electrical houses, circuit breakers, and motor control centers. The company’s strong performance, evidenced by a 49% revenue jump, market value of $2.5 billion, and increased margins, positions it well for continued growth in 2024. Demand for alternative energy sources and smart grid technology further enhances its prospects.
4. Semtech Corp. (NASDAQ: SMTC)
Semtech specializes in semiconductor technology, particularly its LoRa long-range networking initiative for the Internet of Things (IoT). With a market value of $2.6 billion and nearly 200 million devices using this functionality, the company is on a significant growth trajectory. Analysts expect substantial earnings growth, making Semtech a promising mid-cap tech stock.
5. Zeta Global Holdings Corp. (NYSE: ZETA)
Zeta Global provides data-driven consumer intelligence and marketing automation software. The company helps businesses predict consumer intent and optimize marketing efforts. With a market value of $3.7 billion and 24% revenue growth and a 51% increase in cash flow in its latest quarter, Zeta has raised its guidance for the rest of 2024, reflecting its strong growth potential.
Final Thoughts
Mid-cap stocks offer a compelling investment opportunity in 2024, balancing growth potential with relative stability. By including these stocks in your portfolio, you can benefit from their ease of growth, return potential, and diversification benefits. The five mid-cap stocks highlighted exemplify the promising opportunities in this category. As always, conduct thorough research and consider your investment goals and risk tolerance before making any investment decisions.