In this article, we will take a look at the 10 best mid cap value stocks to invest in.
Mid-Cap Stocks are Better in the Near Term
An easing cycle coupled with an upcoming election creates quite the environment for differing opinions to co-exist. On October 9, Jill Carey Hall, Bank of America Global Research head of U.S. small and mid-cap strategy and senior U.S. equity strategist, joined ‘Squawk Box’ on CNBC to discuss her bullish stance on mid-cap stocks, especially in the near term.
Hall stresses that small-cap stocks have been underperforming since the 50 basis point rate cut, going against historical expectations of small-caps performing well in such cases. She emphasized that investors are focused on stocks with stronger fundamentals and small-cap stocks are currently stuck in an earnings recession. We have yet to see a recovery season for small caps, the way we have been seeing it for slightly larger stocks, Carey adds.
READ ALSO 10 Most Profitable Value Stocks To Invest In and 10 Most Promising Mid-Cap Stocks According to Hedge Funds.
Carey shares that mid-cap stocks are likely to be a “better hedge” in the near term, as they boast stronger fundamentals and have better earnings trends. Overall, she believes that mid-cap stocks have historically performed better than small-caps and are, therefore, a better area to target. She also emphasized that one rate cut is not going to solve the re-financing risk that small-caps, especially companies in real estate and tech, inherently come with.
She adds that investors must focus more on themes rather than specific sectors. However, with the current economic backdrop and a soft landing in sight, she advises investors to remain inclined towards stocks with positive revisions, higher quality, and stronger dividend yields, given that as the Fed continues to cut rates, money is expected to be driven more into equity income.
Carey also shares that the current economic environment has been weak but we may see acceleration after this quarter, keeping in mind that current GDP and jobs data have been “encouraging.” While she upholds an element of uncertainty, she remains focused on less risky and high-quality stocks. As investors look to the Fed as a catalyst for the market, high-quality stocks trading at discounted valuations are likely to reap greater benefits. That said, let’s take a look at the 10 best mid-cap value stocks to invest in.
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Our Methodology
To come up with the 10 best mid-cap value stocks to invest in, we used the Finviz stock screener. We set the market capitalization filter to range between $2 billion and $10 billion and the Forward P/E filter to under 15. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted primarily in ascending order of the number of hedge fund holders as of Q2 2024 picked from our database and secondarily in order of their forward P/E and market capitalization.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Mid Cap Value Stocks To Invest In
10. LKQ Corporation (NASDAQ:LKQ)
Number of Hedge Fund Holders: 31
Market Capitalization as of October 28, 2024: $9.95 Billion
Forward P/E as of October 28, 2024: 10.9
LKQ Corporation (NASDAQ:LKQ) ranks 10th on our list of the best mid cap value stocks to invest in. The auto parts company is engaged in the provision of salvage/aftermarket and recycled auto parts. The company has operations in North America, Europe, and Taiwan.
It provides customers with a range of replacement discount auto parts such as engines, transmissions, components, and equipment. LKQ Corporation (NASDAQ:LKQ) has been in business since 1998 and was formed through a combination of wholesale recycled product businesses. The company then grew through strategic initiatives and nearly 270 acquisitions. Today, the company has over 45,000 employees in 1,600 locations across 25 countries.
In the third quarter of 2024, LKQ Corporation (NASDAQ:LKQ) generated $3.6 billion in revenue with $420 million in operating cash flow and $341 million in free cash flow. During the same quarter, the company logged $191 million in net income and returned over $200 million to shareholders.
The company’s acquisitions and partnerships have helped it grow and sustain its business model. During Q3, the net impact of acquisitions and divestitures led to a 3.1% increase in revenue, offsetting declines due to macroeconomic conditions in other areas. LKQ Corporation (NASDAQ:LKQ) is confident about its long-term earnings potential despite current macroeconomic headwinds and short-term industry dynamics.
Artisan Partners’ Artisan Mid Cap Value Fund stated the following regarding LKQ Corporation (NASDAQ:LKQ) in its Q2 2024 investor letter:
“In the health care and consumer discretionary sectors, Baxter International and LKQ Corporation (NASDAQ:LKQ) were key detractors. LKQ is the dominant player in salvage/aftermarket collision parts distribution in North America, with over 70% market share. In addition to continued cost inflation, lower-than-expected collision claims in North America due partly to a mild winter resulted in disappointing quarterly earnings. What was already a cheap stock when we initiated our position in January of this year has become even cheaper. At a 10X P/E, shares trade at a distinct discount to their historical 10-year average of 14X and are also cheaper relative to LKQ’s auto parts retailer peers, which arguably have similar long-term growth profiles. LKQ isn’t a fast-growing business, but it can grow 2% to 4%, and given its dominant market share and mid-teens return on tangible capital, we believe it should trade at a higher valuation. Over the last decade, LKQ has also become the largest mechanical parts distributor in Europe. As is the case in North America, independent European mechanics value LKQ’s reliable distribution and competitive pricing. The European business has improved operationally over the last five years as LKQ has focused on the integration of its various acquisitions to drive margin and free cash flow improvements. LKQ operates in end markets with limited cyclicality as 90% of revenues are tied to non-discretionary spending and reliably has strong free cash flow generation. The company also meets our requirement for a sound financial condition as its debt load is manageable at 2X EBITDA due to its attractive free cash flow. We added to our position on weakness.”
9. Henry Schein, Inc. (NASDAQ:HSIC)
Number of Hedge Fund Holders: 32
Market Capitalization as of October 28, 2024: $9.03 Billion
Forward P/E as of October 28, 2024: 14.7
Henry Schein, Inc. (NASDAQ:HSIC) is a healthcare company that engages in the distribution of medical and dental supplies such as vaccines, pharmaceuticals, financial services, and equipment. The company has been in business for 91 years now and has more than 1 million customers across the globe.
Home to over 300,000 products, Henry Schein, Inc. (NASDAQ:HSIC) is a crucial stakeholder in the healthcare industry, that operates in more than 33 countries and has 58 distribution and manufacturing centers. It ships nearly 141,000 cartons every day and has a strong network of over 3,200 supplier partners and more than 25,000 team members.
In the second quarter of 2024, Henry Schein, Inc. (NASDAQ:HSIC) generated $3.14 billion in revenue and $159 million in operating income. Its global dental segment accounted for most of the sales at $1.92 billion, following my medical sales at $998 million. During the quarter, the company also closed the acquisition of TriMed, a developer of solutions for the orthopedic treatment of lower and upper extremities. The acquisition helped position Henry Schein, Inc. (NASDAQ:HSIC) as a prominent healthcare name providing an extended range of medical care solutions.
Henry Schein, Inc. (NASDAQ:HSIC) enjoys a sustainable business model that promises consistent financial performance and sustained results. At the close of Q2 2024, 32 hedge funds were bullish on the stock according to our Insider Monkey database. HSIC is also a cheap stock trading at 14.7 times its forward earnings, a discount of 29% from the sector median. Analysts polled by Yahoo Finance expect the company to increase its earnings by nearly 6% this year.
Fiduciary Management Inc. stated the following regarding Henry Schein, Inc. (NASDAQ:HSIC) in its Q2 2024 investor letter:
“Henry Schein, Inc. (NASDAQ:HSIC) is the largest dental distributor in the world, holding a leading market share position in all of its main geographies, and is also a leader in medical distribution. Henry Schein provides value to both product manufacturers and its customers. Manufacturers benefit from cost effective access to a highly fragmented customer base, as well as sales and marketing support for products. Practitioner customers benefit from timely access to a broad range of products, a reduction in the number of vendors they need to deal with directly, inventory management services, and equipment servicing. Henry Schein also sells practice management software that is used by ~40% of dental practices in the U.S., which is a very sticky business. We expect continued strong long-term growth in spending on dental services, which will be driven by an aging population, along with a focus on preventive care and demand for cosmetic dentistry procedures. Schein’s stock has been under pressure in the near term because it is still recovering from a cyber-attack that took place late last year, and the macro backdrop continues to be challenged, which has led to muted elective/discretionary sales across the business. The stock is trading well below the market, which we view as attractive given its above-average business quality.”
8. Western Alliance Bancorporation (NYSE:WAL)
Number of Hedge Fund Holders: 32
Market Capitalization as of October 28, 2024: $9.16 Billion
Forward P/E as of October 28, 2024: 11.5
Western Alliance Bancorporation (NYSE:WAL) ranks eighth on our list of the best mid cap value stocks to invest in. The company provides commercial and business banking solutions to people across the United States.
Western Alliance Bancorporation (NYSE:WAL) is one of the best-performing companies in the United States and has more than $80 billion in assets. Its subsidiary, Western Alliance Bank, offers a wide variety of personalized commercial banking solutions and consumer products. As of September 30, the company had total deposits worth $68 billion, up from $54.3 billion on September 30, 2023, representing an increase of $13.8 billion.
During the third quarter of 2024, Western Alliance Bancorporation (NYSE:WAL) generated $199.8 million in net income, up 7.8%. Net revenue reached $823.1 million, up by nearly 15% from the same period in 2023. Additionally, net interest income totaled $696.9 million in Q3 2024, up by 6.1% sequentially and 18.7% year-over-year. WAL celebrated sustainable loan and deposit momentum along with growth in earnings during Q3 2024.
Overall, Western Alliance Bancorporation (NYSE:WAL) was held by 32 hedge funds at the close of Q2 2024, according to the Insider Monkey database. The company has a solid business model and sustainable income source, positioning it as a valuable and profitable stock.
Miller Value Partners Miller Value Deep Value Select Strategy stated the following regarding Western Alliance Bancorporation (NYSE:WAL) in its fourth quarter 2023 investor letter:
“During the quarter, our largest positive contributor was Western Alliance Bancorporation (NYSE:WAL), whose market price was up more than 40%. Western is a leading national commercial bank with a capital-light business model. The company appears to me to be positioned for long-term growth at the high end of their peer group. WAL has industry-leading underwriting (as evidenced by their low loss rate) and return on assets, which, in my view, support their 18-20% target return on common tangible equity target.Consensus expectations remains in the 15% range potentially providing a nice ongoing variant. Western’s mortgage business is also a “hidden asset” not being sufficiently recognized in the company’s current share price in my opinion. At more than 10% of their company revenue and near trough profitability, any future recovery in the mortgage market from lower interest rates could provide greater future earnings power. WAL’s shares remain attractively priced with a price-to-estimated earnings ratio (FY2) below 7x, a 40% discount to its historical long-term average and a greater than 30% discount to their banking peer group.”
7. Sirius XM Holdings Inc. (NASDAQ:SIRI)
Number of Hedge Fund Holders: 33
Market Capitalization as of October 28, 2024: $9.13 Billion
Forward P/E as of October 28, 2024: 9.75
Sirius XM Holdings Inc. (NASDAQ:SIRI) is a leading audio entertainment company in North America that owns SiriusXM, its flagship subscription entertainment business, and Pandora, a large podcast network with a suite of business and advertising solutions.
SiriusXM offers content across music, news, and sports to its audience of nearly 150 million monthly listeners and over 34 million subscribers. Pandora on the other hand has over 50 million active users. At the end of Q2 2024, Sirius XM Holdings Inc. (NASDAQ:SIRI) logged $2.18 billion in revenue and $316 million in net income. By the end of the quarter, SIRI had $343 million in free cash flow and $702 million in adjusted EBITDA. For the year ended 2023, the company generated $8.95 billion in revenue, of which SiriusXM accounted for 76% and Pandora made up 24%.
Following its recent split-off with Liberty Media Corporation, Sirius XM Holdings Inc. (NASDAQ:SIRI) is now an independent entity, and is rapidly growing. The restructuring allows the company to simplify its corporate structure and focus on providing audio entertainment services to people across North America.
At the close of Q2 2024, 33 hedge funds held stakes in the stock, contributing to its ranking as one of the best mid-cap value stocks to invest in. The company benefits immensely from its solid customer base. For the year ended 2023, 96% of revenue came from subscribers, a testament to its sustainable business model. Its largest shareholder, as of June 30, according to the Insider Monkey database, Berkshire Hathaway increased its position in the stock by 263% in Q2 2024.
6. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 34
Market Capitalization as of October 28, 2024: $8.67 Billion
Forward P/E as of October 28, 2024: 11.2
The Mosaic Company (NYSE:MOS) is a chemicals company that mines and processes phosphate and potash minerals into crop nutrients to help feed the world. The company owns a range of products such as performance fertilizers, advanced crop nutrition, and commodity offerings.
The Mosaic Company (NYSE:MOS) serves customers in more than 40 countries and employs more than 13,000 people across six countries. In addition to that, the company also made contributions worth $12 million to the community. Aligning with its corporate social responsibility, the company increased the adoption of 4R nutrient stewardship practices on more than 6 million acres in North America.
In the second quarter of 2024, the company generated $2.8 billion in revenues, experiencing a slight decline due to decreasing selling prices. Gross margin stood at 14% in the second quarter of 2024. Despite a slight financial downturn, the company is working immensely on cost reduction initiatives that were introduced last year. The Mosaic Company (NYSE:MOS) has achieved more than one-third of the targeted $150 million run rate relative to 2023. In addition to that, the company is also on course to reduce 2024 capital expenditures by $200 million from 2023 levels.
Overall, 34 hedge funds held stakes in MOS at the close of Q2 2024, positioning Mosaic Company (NYSE:MOS) as one of the best mid-cap value stocks to invest in. Analysts are also bullish on the stock and their median price target implies an upside of 12% from current levels.
Ariel Investments’ Ariel Focus Fund stated the following regarding The Mosaic Company (NYSE:MOS) in its first quarter 2024 investor letter:
“There were a few notable performance detractors in the quarter. Shares of producer and marketer of crop nutrients, The Mosaic Company (NYSE:MOS), declined in the period, as weaker than expected phosphates and fertilizer volumes as well as higher raw material and production costs weighed on the bottom-line. Management reiterated expectations for tight global grain and oilseed markets in 2024 and believe growers will continue to be incentivized to maximize yields by applying fertilizers. Meanwhile, MOS is focused on cost discipline, free cash flow generation and paying down debt, while continuing to return significant capital to shareholders through buybacks. Given management’s disciplined approach towards capital allocation, we continue to believe the company is well positioned from a risk/reward standpoint.”
5. Lithia Motors, Inc. (NYSE:LAD)
Number of Hedge Fund Holders: 35
Market Capitalization as of October 28, 2024: $9.06 Billion
Forward P/E as of October 28, 2024: 11.3
Lithia Motors, Inc. (NYSE:LAD) ranks fifth on our list of the best mid-cap value stocks to invest in. The automotive dealership company has more than 101,000 vehicles across 300 locations in the US, over 1,000 vehicles in 15 locations in Canada, and more than 4,000 vehicles in 151 locations in the United Kingdom.
Home to more than 51 brands, the company is regarded as one of the fastest-growing companies in the United States. In the third quarter of 2023, Lithia Motors, Inc. (NYSE:LAD) logged the highest third-quarter revenue in company history, at $9.2 billion, up by 11% year-over-year. In addition to that, the company generated $223 million in net income during the same quarter.
In Q3 2024, Lithia Motors, Inc. (NYSE:LAD) initiated multiple store acquisitions to align with its expansion goals. The company completed acquisitions of three stores from the Duval Motor Company in Jacksonville and Gainesville, Florida. The acquisitions will help Lithia Motors expand its footprint in the import and luxury segments and increase its overall geographic coverage.
Overall, Lithia Motors, Inc. (NYSE:LAD) is a popular choice among investors, explaining why 35 hedge funds were bullish on the stock at the close of Q2 2024. In addition to that, the company is also pretty liquid, as it ended the third quarter with more than $1.1 billion in cash and cash equivalents. Analysts are also bullish on the stock and their median price target of $380 points to an upside of 11% from current levels.
Madison Investments Madison Mid Cap Fund stated the following regarding Lithia Motors, Inc. (NYSE:LAD) in its Q3 2024 investor letter:
“During the quarter we added three new holdings: Graco, Lithia Motors, Inc. (NYSE:LAD), and Asbury Automotive. We purchased shares in Lithia Motors and Asbury Automotive, two of the largest auto franchise dealer groups in the country, owning a diversified portfolio of dealerships ranging from Toyota to Ford to Mercedes. Investors tend to pay a lot of attention to the level of new car sales, but dealers actually earn more in profits from parts and service than they do from selling new cars, and this steady business provides a nice ballast throughout the economic cycle. In addition, we believe these businesses have a long runway to create value via consolidation of this fragmented industry, as the advantages of scale are increasing.”
4. American Airlines Group Inc. (NASDAQ:AAL)
Number of Hedge Fund Holders: 38
Market Capitalization as of October 28, 2024: $9.04 Billion
Forward P/E as of October 28, 2024: 8.72
American Airlines Group Inc. (NASDAQ:AAL) is one of the major airline companies in the United States, headquartered in Texas. The company offers a thousand flights every day to over 350 destinations in more than 60 countries. The company was founded 95 years ago and now has over 130,000 employees from across the globe.
In the third quarter of 2024, American Airlines Group Inc. (NASDAQ:AAL) logged $13.6 billion in revenue and ended the quarter with $11.8 billion in total available liquidity, comprising cash and short-term investments. The company’s financial results stem from its reliable operations and effective cost management structures. In addition to that, the company worked to improve its balance sheet during Q3 2024. American Airlines Group reduced its total debt by almost $360 million, an incredible feat towards its goal of reducing total debt by $15 billion by the end of 2025.
AAL’s integrated operations center (IOC) provides customer support every second of the day and facilitates almost 6,000 mainline and regional flights every day, and over 1 million mainline flights annually. In addition to that, its IOC serves as the backbone of the business, where team members work together to ensure safety and service for nearly 200 million annual customers.
Overall, American Airlines Group Inc. (NASDAQ:AAL) is one of the best mid-cap value stocks to invest in because of its popularity among customers. Its commercial strategy and immense focus on customer feedback makes it easier for AAL to capture a wider market. The company is also engaged in improving its sales and distribution strategy which is expected to promise significant revenue growth.
3. Webster Financial Corporation (NYSE:WBS)
Number of Hedge Fund Holders: 42
Market Capitalization as of October 28, 2024: $8.93 Billion
Forward P/E as of October 28, 2024: 9.77
Webster Financial Corporation (NYSE:WBS) ranks third on our list of the best mid-cap value stocks to invest in. The commercial banking corporation is headquartered in Connecticut, United States. The company offers a range of services including personal banking, business banking, wealth management, and commercial banking services.
The company boasts a thorough network of more than 200 banking centers across Connecticut, Massachusetts, Rhode Island, and the New York Metro area. The banking centers are home to 24-hour ATMs, offer notary and safe deposit services, and have relationship managers to assist customers.
Earlier this year in January, the company closed the acquisition of Ametros Financial Corporation. Following the transition, the business continues to operate under the brand names, Ametros and CareGuard. Ametros is one of the largest administrators of medical insurance claim settlements. Consequently, clients make use of the CareGuard platform to manage their existing medical care. The acquisition helped Webster Financial Corporation (NYSE:WBS) enhance its position as a growing source of affordable and long-term deposits.
Webster Financial Corporation (NYSE:WBS) is an investor favorite because of its expansion initiatives and strong financial performance. In the third quarter of 2024, the company generated $647.6 million in revenue, a solid feat amid a challenging economic backdrop. Quarterly net interest income reached $589.9 million, up from $587.1 million in Q3 2023. Additionally, average interest-earnings assets totaled $69.8 billion, up by 4% year-over-year. Overall, 42 hedge funds were bullish on the stock at the close of Q2 2024, according to the Insider Monkey database.
Diamond Hill Capital’s Diamond Hill Select Strategy stated the following regarding Webster Financial Corporation (NYSE:WBS) in its first quarter 2024 investor letter:
“Among our bottom Q1 contributors were Humana, Extra Space Storage and Webster Financial Corporation (NYSE:WBS). Self-storage real estate investment trust (REIT) Extra Space Storage and HSA-focused bank Webster Financial performed well at the end of 2023 as investors anticipated interest rate cuts and easier financial conditions in 2024. As this sentiment largely reversed in early 2024 against a resilient economic backdrop and still-elevated interest rates, real estate (and REITs broadly) and banks were pressured in Q1 (though it’s worth noting Webster Financial shares were modestly positive in the quarter). However, we believe Extra Space Storage has a high-quality, long-term franchise with an industry-leading operating platform that should position it well in the future. Similarly, we believe Webster Financial’s large HSA account platform and diverse deposit base is a strong competitive advantage in the current macroeconomic environment.”
2. Skechers U.S.A., Inc. (NYSE:SKX)
Number of Hedge Fund Holders: 45
Market Capitalization as of October 28, 2024: $9.72 Billion
Forward P/E as of October 28, 2024: 13.9
Skechers U.S.A., Inc. (NYSE:SKX) is a footwear and apparel company based in the United States, that is now known as one of the largest brands in the country.
In the third quarter of 2024, Skechers U.S.A., Inc. (NYSE:SKX) logged $2.35 billion in quarterly revenue, up by nearly 16% from year-over-year. Of this, wholesale sales expanded by almost 21%, and direct-to-consumer sales by nearly 10%. The company attributed its record sales performance to its strong consumer demand and its solid supply chain network ensuring products are available at locations when customers need them.
Skechers U.S.A., Inc. (NYSE:SKX) is also making significant investments in technology across its new product offerings. One of its technological inventions, Skechers Hands-Free Slip-ins, has been crucial to the company’s growth across borders. The company supports its product offerings with technology-focused marketing campaigns that leverage the popularity of athletes and global ambassadors.
Overall, Skechers U.S.A., Inc. (NYSE:SKX) is one of the best mid-cap value stocks to invest in because of its global brand image and increasing focus on technology and technicality. While the company enjoys solid returns from its marketing and product line investments, it strives to instill innovation in all aspects of people’s lives.
1. First Horizon Corporation (NYSE:FHN)
Number of Hedge Fund Holders: 47
Market Capitalization as of October 28, 2024: $9.25 Billion
Forward P/E as of October 28, 2024: 11.4
First Horizon Corporation (NYSE:FHN) ranks first on our list of the best mid-cap value stocks to invest in. The company provides wealth management services, regional banking, and capital markets services. Its products and services encompass banking, borrowing, digital banking, insuring, investing, and trust services.
First Horizon Corporation (NYSE:FHN) is one of the biggest banks in the United States. It has an average daily trading volume of more than $5 billion and has transacted business with more than 50% of all US banks over the past few years, with portfolios amounting to more than $100 million. As of December 31, 2023, the company had over 418 locations across the United States and total assets worth $81.7 billion.
In the third quarter of 2024, First Horizon Corporation (NYSE:FHN) logged $631 million in net interest income and $200 million in fee income, bringing the total revenue for Q3 to $832 million. In addition to that, despite declining short-term rates, net interest income remained stable. The company expects subsequent changes in net interest income as rate cuts are initiated. During the third quarter of 2024, the company grew its client balances by almost $1 billion, with growth momentum particularly coming from the Carolinas, Alabama, and specialty business lines.
Overall, First Horizon Corporation (NYSE:FHN) is one of the best stocks on our list and we say that because of its large customer base, which is constantly expanding, and its strong fundamentals.
Scout Investments, Inc’s Carillon Scout Mid Cap Fund stated the following regarding First Horizon Corporation (NYSE:FHN) in its fourth quarter 2023 investor letter:
“First Horizon Corporation (NYSE:FHN) was the third-largest contributor. This bank holding company rose as the industry rallied due to the investor sentiment shift toward a soft economic landing or continued growth. A soft economic landing, should it occur, means that banks are likely to experience fewer loan losses than in a recession and steadier interest rate margins if extreme interest rate volatility is dampened.”
While we acknowledge the potential of FHN to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FHN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
