In this article, we discuss 10 best mid cap stocks to buy in 2022. If you want to skip our detailed analysis of these stocks, go directly to 5 Best Mid Cap Stocks To Buy In 2022.
Mid cap stocks fall between small and large-cap companies, with market capitalization ranging from $2 billion to $10 billion. These companies are usually young and experiencing fast-paced growth, and the post-pandemic technology adoption by smaller companies has accelerated their transformation into mid-cap firms.
Mid cap companies have usually weathered the challenges inherent to small businesses, such as gathering startup capital and managing initial growth, but they still have potential for rapid growth. The S&P MidCap 400 has outperformed the S&P 500 and the S&P SmallCap 600 for most of the past 20 years.
In a study of annualized total returns from December 30, 1994 through August 31, 2015 by S&P Global, S&P MidCap 400 sectors outperformed 8 of their 10 S&P 500 counterparts. This suggests that the performance of the mid-cap segment was more reliable and it also outshined the large-cap segment in terms of returns.
Although investors usually flock to large-cap stocks like Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA), and Netflix, Inc. (NASDAQ:NFLX), it is a wise idea to diversify portfolios with small and mid-cap stocks, given the historical outperformance, growth potential, and affordable share prices.
Our Methodology
We selected mid-cap stocks with a market cap between $2 billion to $10 billion, making sure to pick the companies which received positive analyst ratings recently. We ranked the securities according to the hedge fund sentiment around each stock, which was gauged from the 867 elite funds that were tracked by Insider Monkey in the third quarter of 2021.
Best Mid Cap Stocks To Buy In 2022
10. SPS Commerce, Inc. (NASDAQ:SPSC)
Market Capitalization as of February 15: $4.624 billion
Number of Hedge Fund Holders: 17
SPS Commerce, Inc. (NASDAQ:SPSC) is a Minnesota-based company that provides on-demand supply chain management solutions to businesses. In Q3 2021, 17 hedge funds were bullish on SPS Commerce, Inc. (NASDAQ:SPSC), down from 20 funds in the quarter prior. Shannon River Fund Management held the leading stake in the company in the third quarter of 2021, with 242,326 shares worth $39 million.
SPS Commerce, Inc. (NASDAQ:SPSC) reported its Q4 financial results on February 9, posting earnings per share of $0.46, beating estimates by $0.04. The revenue also exceeded market consensus estimates by $2.08 million.
On February 10, Loop Capital analyst Mark Schappel lowered the price target on SPS Commerce, Inc. (NASDAQ:SPSC) to $175 from $195 and kept a Buy rating on the shares after the solid Q4 earnings beat. The lower price target reflects the recent multiple compression in the broader software sector. SPS Commerce, Inc. (NASDAQ:SPSC) should remain a long-term beneficiary of positive retail trends that include growing ecommerce demand, supply chain automation programs, and omnichannel commerce initiatives, the analyst told investors in a research note.
SPS Commerce, Inc. (NASDAQ:SPSC) is a good mid-cap addition to diversify a portfolio that normally holds stocks like Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA) and Netflix, Inc. (NASDAQ:NFLX).
Here is what Headwaters Capital has to say about SPS Commerce, Inc. (NASDAQ:SPSC) in its Q3 2021 investor letter:
“Top Contributor: SPS Commerce (SPSC) +62% SPS Commerce is a provider of supply chain software called electronic data interchange (EDI) that is used by suppliers of large retailers (Costco, Walmart, Bass Pro Shops, etc). SPSC’s software helps to automate and streamline the order fulfillment process for retailers and their suppliers by enabling the exchange of real time information between the two parties, which allows for better inventory management and more efficient shipping (drop-ship v. direct to store). SPSC is a beneficiary of the trend toward omnichannel retail where customers expect multiple order fulfillment options (in-store, delivery, buy online pick up in store) and more complex supply chains as both trends require increased collaboration between the retailer and their suppliers. In conjunction with Q2 results, SPSC raised its long-term revenue guidance forecast, which was well received by the market given lingering concerns that customers had temporarily adopted SPSC’s software during COVID to enable drop-shipping. In reality, SPSC’s software is a sticky product that streamlines the fulfillment process and will be increasingly used throughout the omnichannel retail supply chain.”
9. Shutterstock, Inc. (NYSE:SSTK)
Market Capitalization as of February 15: $3.214 billion
Number of Hedge Fund Holders: 19
Shutterstock, Inc. (NYSE:SSTK) is a New York-based company that offers stock photos, music, videos, royalty-free vector graphics, and illustrations to customers worldwide.
Publishing its Q4 results on February 10, Shutterstock, Inc. (NYSE:SSTK) posted earnings per share of $0.77, surpassing estimates by $0.29. Revenue for the period jumped 13.73% year-over-year to $205.78 million, outperforming estimates by $3.87 million.
Shutterstock, Inc. (NYSE:SSTK) declared on January 25 a $0.24 per share quarterly dividend, a 14.3% increase from its prior dividend of $0.21. The dividend is payable on March 17, to shareholders of record on March 3.
Needham analyst Bernie McTernan on February 11 lowered the price target on Shutterstock, Inc. (NYSE:SSTK) to $115 from $145 to reflect a lower target multiple but maintained a Buy rating on the shares after its Q4 earnings beat. According to the analyst, the risk for margin expansion is to the upside, and this is a “compelling time” for Shutterstock, Inc. (NYSE:SSTK) as it launches products focused on new verticals.
According to Insider Monkey’s third quarter database of elite hedge funds, 19 funds reported owning stakes worth $234.6 million in Shutterstock, Inc. (NYSE:SSTK). Renaissance Technologies was the biggest stakeholder of the company in Q3 2021, with more than 1 million shares valued at $113.8 million.
Here is what Bernzott Capital Advisors has to say about Shutterstock, Inc. (NYSE:SSTK) in its Q3 2021 investor letter:
“Shutterstock (SSTK): This market share-gaining provider of stock media continues to report solid earnings with gains in its subscription business. It recently formed Shutterstock.AI following the acquisition of several small businesses, and this effort holds promise for advances in data-driven insight and predictive performance.”
8. Digital Turbine, Inc. (NASDAQ:APPS)
Market Capitalization as of February 15: $5.042 billion
Number of Hedge Fund Holders: 19
Digital Turbine, Inc. (NASDAQ:APPS) is a company offering a mobile services platform that works to provide portal management, user interface, content development, and advertising.
Maxim analyst Allen Klee on February 9 lowered the price target on Digital Turbine, Inc. (NASDAQ:APPS) to $108 from $132 to reflect its peer group valuation compression, but kept a Buy rating on the shares after its Q4 earnings beat.
Digital Turbine, Inc. (NASDAQ:APPS) reported earnings for the quarter ending December 2021 on February 8, posting an EPS of $0.49, beating estimates by $0.06. Revenue over the period increased 323.84% year-on-year to $375.49 million, surpassing estimates by $22.28 million.
On December 28, Digital Turbine, Inc. (NASDAQ:APPS) announced a multi-year strategic partnership with Alphabet Inc. (NASDAQ:GOOG) that accelerates the company’s product and growth strategy to support the Android ecosystem by allowing nearly a billion devices with intelligent app discovery. Digital Turbine, Inc. (NASDAQ:APPS) stock gained approximately 10% on the announcement.
Greenhaven Road Investment Management, the largest Digital Turbine, Inc. (NASDAQ:APPS) stakeholder, owned 1.40 million shares of the company in Q3 2021, worth $96.2 million. Overall, 19 hedge funds were bullish on the stock in the third quarter of 2021.
Here is what Greenhaven Road Capital has to say about Digital Turbine, Inc. (NASDAQ:APPS) in its Q4 2021 investor letter:
“Digital Turbine (APPS) – In 2021, digital advertising company Digital Turbine, Inc. (NASDAQ:APPS) completed 3 acquisitions that allow them to control the mobile advertising process from end to end. The company enjoys technology advantages by being pre-installed on devices, as well as first-party data advantages from their carrier partnerships. At their most recent analyst day,
Digital Turbine laid out a path to quadrupling revenues and growing EBITDA by 10X in the next three to five years. Given today’s starting multiple of less than 8X this year’s expected gross profits, anything approximating achieving their “plan” should yield very attractive returns over time. Reasons for optimism include the fact that their software is currently installed on less than 20% of mobile phones, providing a notable growth opportunity for existing technology without additional capital spending. The company also has opportunities to increase the number of carriers and phone manufacturers that they work with, as well as the number of services each carrier purchases.
Digital Turbine, Inc. (NASDAQ:APPS) also has a massive opportunity with their SingleTap technology, which dramatically improves the likelihood that an app is installed when a user clicks on its SingleTap-enabled ad. SingleTap has grown to a $100M+ business with just 15 customers. At their analyst day, Digital Turbine’s Chief Revenue Officer charted the path to “…really accelerate this into a $1 billion-plus business over the next few years.” In his words, “[t]he way we see this is a very relatively moderate growth from 15 advertisers to 150, which, by the way, represents only a subset of our total advertiser customers today at Digital Turbine.” The current run rate revenues for the entire company are $1.2B per year, so growing SingleTap to $1B in revenue itself would nearly double company revenue overall. This doubling only requires blocking and tackling on an existing product with a very high value proposition to a subset of customers; it does not require a moonshot invention. The SingleTap technology could also be licensed to other platforms such as Snap and Meta (Facebook). At an investor conference in December, management tried to highlight their announcement that Facebook was live-testing SingleTap, which could be a very big deal since Facebook is the second largest distributor of Android apps (Digital Turbine’s priority). The market yawned, and the shares ended down…” (Click here to see the full text)
7. CarGurus, Inc. (NASDAQ:CARG)
Market Capitalization as of February 15: $4.011 billion
Number of Hedge Fund Holders: 25
CarGurus, Inc. (NASDAQ:CARG) operates an automotive research and shopping website that allows customers to compare listings for used and new vehicles in their locality, where they can connect directly with sellers. CarGurus, Inc. (NASDAQ:CARG) beat market consensus estimates for revenue and earnings in the third quarter of 2021.
On January 7, Jefferies analyst John Colantuoni upgraded CarGurus, Inc. (NASDAQ:CARG) to Buy from Hold with a price target of $45, up from $42. The company’s leading website traffic gives it a differentiated ability to tap 10 million units currently sold peer-to-peer, adds the analyst. In addition to being a standalone revenue driver, wholesale broadens CarGurus, Inc. (NASDAQ:CARG)’s dealership offering and deepens engagement with dealerships, allowing them to “act from a position of strength”, noted the analyst.
In Q3 2021, 25 hedge funds were bullish on CarGurus, Inc. (NASDAQ:CARG), with collective stakes amounting to roughly $282 million. PAR Capital Management held a $62.5 million position in CarGurus, Inc. (NASDAQ:CARG) at the end of the third quarter, and is the leading stakeholder of the company.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), NVIDIA Corporation (NASDAQ:NVDA) and Netflix, Inc. (NASDAQ:NFLX), CarGurus, Inc. (NASDAQ:CARG) is gaining popularity among smart investors.
6. Revolve Group, Inc. (NYSE:RVLV)
Market Capitalization as of February 15: $4.278 billion
Number of Hedge Fund Holders: 25
Revolve Group, Inc. (NYSE:RVLV) is a California-based online fashion retailer that connects consumers with global fashion influencers, as well as established and emerging apparel brands.
Jefferies analyst Randal Konik on February 9 raised the price target on Revolve Group, Inc. (NYSE:RVLV) to $90 from $87 and kept a Buy rating on the shares, observing that year-over-year growth in web traffic to revolve.com has increased in each of the last six months and that social engagement data shows strong momentum. The analyst also raised his Q4 estimates for sales and EPS for Revolve Group, Inc. (NYSE:RVLV).
Among the hedge funds monitored by Insider Monkey in Q3 2021, 25 funds reported owning stakes in Revolve Group, Inc. (NYSE:RVLV), with stakes equaling $229.8 million, as compared to 22 funds in the prior quarter, holding stakes in Revolve Group, Inc. (NYSE:RVLV) worth $211.4 million. Two Sigma Advisors held a prominent stake in Revolve Group, Inc. (NYSE:RVLV) at the end of September, with 546,000 shares valued at $33.7 million.
Here is what Polen Capital has to say about Revolve Group, Inc. (NYSE:RVLV) in its Q2 2021 investor letter:
“Our top contributors in the second quarter (includes ) Revolve. evolve Group, Inc. (NYSE:RVLV) is a next-generation online e-commerce player that has used digital transformation to reinvent fashion retailing. The company leverages a close, data-driven customer connection in an effort to create a high return on capital business model with durable long-term growth.”
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Disclosure: None. 10 Best Mid Cap Stocks To Buy In 2022 is originally published on Insider Monkey.
