In this article, we will discuss the 10 Oversold Midcap Stocks to Buy Right Now.
The outlook for mid-cap stocks is looking increasingly bullish after lagging large-cap stocks for the better part of the year. That’s the sentiment in the equity market in the aftermath of the “red wave” sweep in the just concluded US elections. Growing optimism that a Republican administration will help foster a pro-growth environment while reducing regulatory constraints are some factors that make a case for mid-cap stocks heading into year-end.
While interest rate cuts by the US Federal Reserve were expected to be a positive for small-cap stocks, that has not been the case. Most have underperformed in the market on investors paying close attention to fundamentals. While most small-cap companies are struggling with disappointing financial results and outlooks, Bank of America Global Research Head Jill Carey Hall believes it is time to pay attention to mid-cap stocks.
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“I think midcaps could be a better hedge for the near term, they have seen better earnings and guidance trends and they have historically still done well and often time better than smaller caps following the initial Federal Reserve cut historically,” said Hall in an interview with CNBC’s Squawk Box.
The S&P 400, a benchmark for midsized companies, is only up by about 17% year to date. While it has underperformed the larger S&P 500, up by about 22%, the S&P 400 index has started showing signs of edging higher, signaling renewed investor interest in mid-cap companies. The optimism comes from growing expectations that they will be one of the biggest beneficiaries of reduced regulations and tax cuts from the Trump administration.
Similarly, the case for oversold mid-cap stocks is growing amid the interest rate cutting spree by the Fed which is expected to steer the economy into a soft landing. The interest rate environment is becoming increasingly favorable for small and mid-sized companies looking to access cheap capital to enhance their operations.
“Historical data suggest that smaller-cap stocks have tended to be main beneficiaries once the Fed begins to lower rates. Therefore, we continue to advise investors to increase exposure to this area since we believe it is only a matter of time before the fortunes of this group take a turn for the better,” BMO Capital Markets’ Brian Belski wrote in October.
Compared to large-cap stocks, which can issue debt at a rate that reflects the quality of their income statement and balance sheet, small-cap stocks are more vulnerable to high interest rates due to their cost of borrowing.
Consequently, technology companies focused on revolutionary technologies such as artificial intelligence and machine learning should be the biggest beneficiaries of being able to access cheap capital to accelerate their research and development activities. Likewise, small-cap utilities and industrial companies are on the cusp of booming business amid a massive increase in power demand driven by the artificial intelligence boom.
Mid-cap stocks that have pulled back significantly while backed by solid underlying fundamentals offer opportunities heading into the year-end. With valuations in the overall market appearing overstretched, now would be the best time to pay close watch to the best oversold mid-cap stocks to buy, as most are well poised to benefit from a favorable monetary policy environment and regulatory environment under the new administration.
Source: Pexels
Our Methodology
To compile our list of the oversold midcap stocks to buy right now, we used the Finviz and Yahoo stock screeners to find stocks with a market cap of between $2 billion and $10 billion. We then focused on stocks that have fallen significantly by more than 30% year to date and have a forward P/E of less than 10 as of November 14. We then narrowed our choices to 10 stocks that have significant upside potential based on analysts’ average price targets. The list is sorted in ascending order of their upside potential.
At Insider Monkey, we are obsessed with 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 Oversold Midcap Stocks to Buy Right Now
10. Atkore Inc. (NYSE:ATKR)
Forward P/E: 8.04
Analysts Upside Potential as of November 14: 20.38%
Year to date performance as of November 14: -43.31%
Atkore Inc. (NYSE:ATKR) is an industrial company that manufactures and sells electrical, mechanical safety, and infrastructure products and solutions. Down by about 43% year to date, the stock has felt the full brunt of a turbulent market environment.
In addition to being named as one of the defendants in an antitrust case brought against a group of PVC electrical conduit and water pipe manufacturers for price manipulation, Atkore Inc. (NYSE:ATKR) has recently had to contend with mounting pricing pressure and decreased profitability brought on by Mexican steel conduit dumping. Its core business has also been hit hard by a slower macro environment and poor visibility for upcoming orders headwinds that have affected its sentiments in the market.
In Q3, revenues fell 10.5% to $822.4 million, with net income per diluted share dropping to $1.80 from $3.33 last year. Despite these issues, organic volume increased 8% sequentially and 4% year to date, and the Safety & Infrastructure business is improving operational efficiency at its new Hobart, Indiana facility.
It is trading at a discount with a price-to-earnings multiple of 8.04, backed by a healthy balance sheet that allows the company to return value through dividends. Consequently, Atkore Inc. (NYSE:ATKR) is one of the best oversold mid-cap stocks to buy, as it rewards income-focused investors with a 1.35% dividend yield. Additionally, analysts on Wall Street rate the stock as a buy with an average price target of $111.33, implying a 20.38% upside potential, as of November 14, 2024.
Here is what Columbia Acorn Fund said about Atkore Inc. (NYSE:ATKR) in its Q3 2024 investor letter:
“Atkore Inc.Atkore Inc. (NYSE:ATKR) is a leading manufacturer of electrical products primarily for the non-residential construction and renovation markets, and safety and infrastructure products for the construction and industrial markets. Electrical products form the critical infrastructure that enables the deployment, isolation and protection of a structure’s electrical circuitry from the original power source to the final outlet. Atkore is the only vendor with meaningful share across PVC, steel and high-density polyethylene conduits making it easy for distributors and contractors to get all three with one order. Atkore has faced several headwinds recently including increasing pricing pressure and lower profitability due to Mexican steel conduit dumping as well as being named as one of the defendants in antitrust litigation filed against a group of PVC electrical conduit and water pipe manufacturers for price manipulation. A slower macro backdrop and limited visibility for future orders remain headwinds. We have added on weakness given the long-term secular tailwinds from the electrification of everything and highly attractive risk/reward proposition.”
9. Avis Budget Group, Inc. (NASDAQ:CAR)
Forward P/E: 3.39
Analysts Upside Potential as of November 14: 25.13%
Year to date performance as of November 14: -39.86%
Avis Budget Group, Inc. (NASDAQ:CAR) is an industrial company that provides car and truck rentals, car sharing and ancillary products and services. While the stock is down by about 39% year to date, it remains one of the oversold mid-cap stocks to buy as the company is well positioned to benefit from an improved rental car sector.
Avis Budget Group, Inc. (NASDAQ:CAR) reported Q3 sales of $3.5 billion, net income of $238 million, and adjusted EBITDA of $503 million. The company improved vehicle utilization and maintained stable pricing, with adjusted EBITDA rising 5% in rental days to $139 million internationally and $384 million in the Americas. It generated $1.3 billion in cash from operating activities and $600 million in adjusted free cash flow.
As of the end of Q3, Avis Budget Group, Inc. (NASDAQ:CAR) had $1.2 billion in liquidity and $3.2 billion in fleet funding capacity; consequently, it remains in a solid financial position to continue returning value by buying back stock as it trades at a significant discount with a price-to-earnings multiple of 3.39.
Analysts on Wall Street rate the stock as a buy with an average price target of $132.17, implying a 25.13% upside potential as of November 14, 2024.
8. Lear Corporation (NYSE:LEA)
Forward P/E: 6.91
Analysts Upside Potential as of November 14: 34%
Year to date performance as of November 14: -30.47%
Lear Corporation (NYSE:LEA) is an auto parts company that designs, develops, manufactures and sells automotive seating and electrical distribution systems. Down by about 30% year to date, the stock has felt the full brunt of the high interest rate environment that has affected consumer purchasing power.
Concerns over weaker global light vehicle production and lower EV penetration have impacted market sentiment and revenue streams. However, Lear Corporation (NYSE:LEA) benefits from strong ties with Chinese manufacturers, offsetting downturns in the US and Europe. Management is optimistic about long-term growth, targeting 4 points growth in seating and 6 points in E-Systems over the next five years, with investments in automation and integration expected to reduce costs and boost profit margins.
While revenue in the third quarter was down by 3% year over year to $5.58 billion, earnings increased to $2.89 a share compared to $2.87 a share delivered the same quarter last year. The company also exited the quarter in a solid financial position with cash and cash equivalents of $764 million.
Lear Corporation (NYSE:LEA) continues to return value through buybacks, having repurchased $209 million worth of shares in Q3, affirming why it is one of the best oversold mid-cap stocks to buy. While trading at a price-to-earnings multiple of 6.91, the stock comes with a 3.16% dividend yield. Analysts have an average price target of $132.10, implying a 34% upside potential as of November 14, 2024.
7. XP Inc. (NASDAQ:XP)
Forward P/E: 10.22
Analysts Upside Potential as of November 14: 36.90%
Year to date performance as of November 14: -34.32%
XP Inc. (NASDAQ:XP) is a financial services company that provides products and services. While down by about 34.32% year to date, growth in the core business depicted by solid financial results should support a bounce back from the current slump.
The company is enjoying successful cross-selling of new product offerings such as insurance and cards. Additionally, XP Inc. (NASDAQ:XP) is benefiting from improving economic conditions in Brazil as the central bank lowers interest rates. Management has also embarked on a cost control drive, with expenses decreasing as a revenue percentage, fueling better gross margins. With the better-than-expected financial results, XP remains on track to meet its fiscal 2026 financial targets.
XP Inc. (NASDAQ:XP) is one of the best mid-cap stocks to buy, boasting a solid balance sheet with a net asset value of over $1.5 billion. Consequently, it has started returning value to shareholders through buybacks. It is also on course to pay a special dividend in the fourth quarter. While trading at a price-to-earnings multiple of 10.22, the stock is rated as a buy with an average price target of $23, implying a 36.90% upside potential as of November 14, 2024.
6. Axcelis Technologies, Inc. (NASDAQ:ACLS)
Forward P/E: 11.06
Analysts Upside Potential as of November 14: 44.24%
Year to date performance as of November 14: -36.08%
Axcelis Technologies, Inc. (NASDAQ:ACLS) is a technology company that designs, manufactures, and services implantation and other processing equipment used in the fabrication of semiconductor chips. The stock has lost about 36.08% in market value year to date. The underperformance has to do with growing concerns about the company’s core business and disappointing financial results.
Axcelis Technologies, Inc. (NASDAQ:ACLS) reported disappointing Q3 results on November 6, 2024, with revenue dropping to $256.56 million and net income falling to $48.58 million. Q3 bookings were $84 million below expectations, leading to a reduced 2024 backlog of $879 million. Despite these results, Axcelis is optimistic about a cyclical recovery in advanced logic and memory markets and expects improvement in the New Year, driven by its involvement in automotive and industrial automation chip production.
After a significant pullback, Axcelis Technologies, Inc. (NASDAQ:ACLS) is trading at a discount with a price-to-earnings multiple of 11.06. Analysts on Wall Street rate the stock as a buy with an average price target of $115, implying a 44.24% upside potential as of November 14, 2024.
Middle Coast Investing stated the following regarding Axcelis Technologies, Inc. (NASDAQ:ACLS) in its Q3 2024 investor letter:
“Axcelis Technologies, Inc. (NASDAQ:ACLS), the semiconductor equipment maker we own in most accounts, is also in transition. Demand for electric vehicles and hybrids has slowed, while demand for memory chips has not yet picked up. Caught in between these cycles, its shares sold off heavily this quarter, and as one of our biggest positions, that hurt our results. It is also a company with a great balance sheet, that has gained share in its sector, and that is exposed to areas of our economy that should grow for years, all while priced relatively cheaply. Micron’s earnings at the end of the quarter suggested the memory recovery is at hand.”
5. APA Corporation (NASDAQ:APA)
Forward P/E: 5.80
Analysts Upside Potential as of November 14: 44.82%
Year to date performance as of November 14: -39.02%
APA Corporation (NASDAQ:APA) is an independent energy company that explores for, develops, and produces natural gas, crude oil, and natural gas liquids. It has oil and gas operations in the United States, Egypt, and the North Sea.
Amid the slump year to date, APA Corporation (NASDAQ:APA) is one of the oversold mid-cap stocks to buy as it is well positioned to benefit from the Trump Administration reducing regulations in US oil drilling. The company delivered strong Q3 results on November 6, 2024, with adjusted earnings of $370 million ($1 per share) and $1.3 billion in net cash from operating activities, driven by higher production and lower costs. APA also benefits from significant cash flow from US third-party gas trading activities.
APA Corporation (NASDAQ:APA) is trading at a significant discount, going by the 5.80 price-to-earnings multiple compared to 23 for the S&P 500. Additionally, the stock has proved worth generating value for shareholders, going by its 4.57% dividend yield.
4. Celanese Corporation (NYSE:CE)
Forward P/E: 7.71
Analysts Upside Potential as of November 14: 53.04%
Year to date performance as of November 14: -52.17%
Celanese Corporation (NYSE:CE) is a basic materials company that manufactures and sells high-performance engineered polymers. The specialty materials company has felt the full wrath of the market after posting disappointing financial results, slashing its dividend, and saying it would cut production because of falling sales.
Celanese Corporation (NYSE:CE) has seen its stock drop by 52.17% year to date due to industry changes and weak performance in key markets. In Q3, it reported earnings per share of $2.44 and a 2.8% sales decline to $2.65 billion, missing expectations. To improve long-term prospects, the company is cutting manufacturing costs, suspending production at some facilities, aiming to raise $200 million through inventory release, and enhancing operational efficiency while integrating its mobility and materials businesses.
Likewise, Celanese Corporation (NYSE:CE) stands out as one of the best oversold mid-cap stocks to buy. Trading at a price-to-earnings multiple of 7.71, the stock yields 3.70% on dividends, ideal for generating passive income. Analysts on Wall Street have an average price target of $113.25, implying a 53.04% upside potential as of November 14, 2024.
3. Ultrapar Participações S.A. (NYSE:UGP)
Forward P/E: 8.57
Analysts Upside Potential as of November 14: 66.20%
Year to date performance as of November 14: -33.70%
Ultrapar Participações S.A. (NYSE:UGP) is an energy company that distributes liquefied petroleum gas to residential, commercial, and industrial consumers. It is one of the most oversold mid-cap stocks, going by the 33.80% year-to-date drop.
Despite underperforming due to energy sector volatility and oil prices dropping below $70 a barrel, Ultrapar Participações S.A. (NYSE:UGP) remains a strong choice. It is one of Brazil’s top three fuel distribution and storage companies, with over 7,000 service stations and a 19% market share in vehicle fuel distribution. Additionally, it operates one of the largest LPG distribution networks and has an extensive bulk liquids storage terminal network in Brazil.
While trading at a discount with a price-to-earnings multiple of 8.57, it rewards investors with a 3.51% dividend yield, affirming the strength of its balance sheet. Additionally, analysts on Wall Street have an average price target of $5.95, implying a 66.20% upside potential as of November 14, 2024.
2. Concentrix Corporation (NASDAQ:CNXC)
Forward P/E: 3.23
Analysts Upside Potential as of November 14: 94.34%
Year to date performance as of November 14: -58.38%
Concentrix Corporation (NASDAQ:CNXC) is a technology company that provides customer experience solutions for technology, retail, banking, communications and healthcare industries. The stock has shed more than 50% in market value on growing concerns that the company’s core business is threatened amid the artificial intelligence revolution.
Concentrix Corporation (NASDAQ:CNXC) has also been investing in artificial intelligence, focusing on technology and generative AI to enhance its position in the industry. With the recent patent for its AI platform, GILES, which automates coding and testing processes, Concentrix has demonstrated its commitment to innovation. The company’s AI advancements in knowledge management, customer support, and automation are anticipated to boost efficiency.
Solid financial results, strategic positioning in the customer solutions industry and investments in AI affirm why Concentrix Corporation (NASDAQ:CNXC) is one of the best oversold stocks to buy right now. The stock trades at a price-to-earnings multiple of 3.23 compared to an average P/E of 32 for tech stocks. Analysts on Wall Street rate it as a buy with an average price target of $79, implying 94.34% upside potential as of November 14, 2024.
1. Cosan S.A. (NYSE:CSAN)
Forward P/E: 6.47
Analysts Upside Potential as of November 14: 105.49%
Year to date performance as of November 14: -49.81%
Cosan S.A. (NYSE:CSAN) is an energy company that engages in the fuel distribution business. While the stock has shed about 49.81% in market value year to date, it remains one of the oversold stocks to buy owing to the company’s exposure to expanding demands for renewable energy and a diversified business model.
Cosan S.A. (NYSE:CSAN) is expected to benefit from the rising demand for biofuels, with its Raízen Energia division producing ethanol, raw sugar, and energy from sugarcane, while Raízen Combustíveis manages fuel distribution. As one of Brazil’s largest lubricant companies, Cosan’s long-term prospects are promising. Management is also focused on cost restructuring to improve profit margins, counteract high interest rates, ensure safety compliance, guarantee dividends, and enhance debt service coverage.
Cosan S.A. (NYSE:CSAN) stands out as one of the best oversold mid-cap stocks to buy, as it has maintained dividend payments for 15 consecutive years, affirming its commitment to returning value to shareholders. It is trading at a price-to-earnings multiple of 6.47, a discount to the broader market. Cosan is rated as a Buy with an average price target of $16.07, implying a 105.49% upside potential as of November 14, 2024.
While we acknowledge the potential of CSAN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CSAN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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