14 Best Mid-Cap Stocks To Buy Now

Published on October 17, 2022 at 9:34 am by Omer Farooq in Hedge Funds, News

In this article, we will look at the 14 best mid-cap stocks to buy now. If you want to explore similar stocks, you can also take a look at 5 Best Mid-Cap Stocks To Buy Now.

Mid-cap stocks may be thought of as the “sweet spot” between the rampant volatility of small-caps and the stability of large-caps. According to data from Alger, mid-cap stocks have outperformed both small-cap and large-cap stakes based on risk-adjusted returns. Between 1990 and 2020, the Sharpe ratio, a measure of performance relative to risk, for mid-cap stocks was higher than that of both small-cap and large-cap stocks. Mid-cap stocks had a Sharpe ratio of 0.60, while small-caps had a Sharpe ratio of 0.44, and large-caps had a Sharpe ratio of 0.56. Alger researchers also pointed out that mid-cap stocks account for roughly 20% of the U.S. stock market and just 11% of U.S. mutual funds and exchange-traded funds (ETFs). This finding suggests that a lot of mid-cap companies are overlooked by the market, and investors can unlock new value in these neglected spaces.

Finding good quality companies that are overlooked by the market is a challenge. Thomas Cole, CFA and co-founder of Chicago-based investment advisory firm, Distillate Capital LLC, appeared in an interview on TD Ameritrade where he talked about his company’s small- and mid-cap equity fund and what approach are they using at Distillate Capital. Thomas Cole said that his strategy is to “focus on free cash flow” and that he looks for “better stability and better quality combined with better valuation” which is measured on the basis of free cash flow.

Some of the best profitable and cash-rich mid-cap stocks that are on investors’ and analysts’ watch lists right now include Kohl’s Corporation (NYSE:KSS), Builders FirstSource, Inc. (NASDAQ:BLDR), and Alcoa Corporation (NYSE:AA). These, among others, are discussed further in the article below.

Our Methodology

To determine the best mid-cap stocks to buy now, we screened for profitable mid-cap companies that were trading below their intrinsic values and had solid product pipelines, business models, and balance sheets. We narrowed down our selection to companies with positive market sentiment. Along with each of our picks, we have mentioned the hedge fund sentiment, analyst ratings, and top shareholders. These stocks are arranged according to their popularity among elite hedge funds.

Best Mid-Cap Stocks To Buy Now

14. Plains All American Pipeline, L.P. (NASDAQ:PAA)

Market Cap as of October 14: $7.73 Billion

Number of Hedge Fund Holders: 5

Plains All American Pipeline, L.P. (NASDAQ:PAA) is involved in the pipeline transportation and storage of crude oil and natural gas liquids in the United States and Canada. On October 10, Plains All American Pipeline, L.P. (NASDAQ:PAA) declared a quarterly cash dividend of $0.2175 per common share. The dividend is payable on November 14 to stockholders of record on October 31. As of October 14, Plains All American Pipeline, L.P. (NASDAQ:PAA) is up 13% for the year, is offering a forward dividend yield of 7.86%, and is trading at a PE multiple of 13x. Plains All American Pipeline, L.P. (NASDAQ:PAA) has free cash flows of over $1.75 billion and is one of the best mid-cap stocks to buy now.

This August, Stifel analyst Selman Akyol upgraded Plains All American, L.P. (NASDAQ:PAA) to Buy from Hold and raised his price target to $16 from $14. On August 16, Barclays analyst Theresa Chen raised her price target on Plains All American, L.P. (NASDAQ:PAA) to $13 from $12 and reiterated an Equal Weight rating on the shares.

At the end of Q2 2022, 5 hedge funds were long Plains All American, L.P. (NASDAQ:PAA) and held stakes worth $29.79 million in the company. Of those, Arrowstreet Capital was the top shareholder in the company and had stakes worth $16.66 million.

Other profitable, cash-rich, and undervalued mid-cap stocks with strong business fundamentals include Kohl’s Corporation (NYSE:KSS), Builders FirstSource, Inc. (NASDAQ:BLDR), and Alcoa Corporation (NYSE:AA).

13. Arbor Realty Trust, Inc. (NYSE:ABR)

Market Cap as of October 14: $2.05 Billion

Number of Hedge Fund Holders: 12

Arbor Realty Trust, Inc. (NYSE:ABR) is a mortgage REIT that invests in multifamily, single-family rental, and commercial real estate markets. Wall Street is bullish on Arbor Realty Trust, Inc. (NYSE:ABR) and the stock is one of the best mid-cap stocks to buy now. On October 3, Piper Sandler analyst Crispin Love revised his price target on Arbor Realty Trust, Inc. (NYSE:ABR) to $16.50 from $18.50 and maintained an Overweight rating on the shares.

Arbor Realty Trust, Inc. (NYSE:ABR) is trading at bargain levels and is also offering a strong dividend. As of October 14, the stock has a trailing twelve-month PE ratio of 5.93 and is offering a forward dividend yield of 12.75%. The company has a trailing twelve-month operating margin of 67.8% and has free cash flows of roughly $254 million.

At the close of the second quarter of 2022, 12 hedge funds disclosed ownership of stakes in Arbor Realty Trust, Inc. (NYSE:ABR). The collective stakes of these hedge funds amounted to $74.5 million. As of June 30, Balyasny Asset Management is the largest shareholder in Arbor Realty Trust, Inc. (NYSE:ABR) and has stakes worth $19.05 million in the company.

12. Sibanye Stillwater Limited (NYSE:SBSW)

Market Cap as of October 14: $6.29 Billion

Number of Hedge Fund Holders: 16

Sibanye Stillwater Limited (NYSE:SBSW) is a leading South African metals and mining company that explores and produces s gold, nickel, copper, and chrome among other precious metals. At the end of Q2 2022, 16 hedge funds were bullish on Sibanye Stillwater Limited (NYSE:SBSW) and held stakes worth $153 million in the company.

Sibanye Stillwater Limited (NYSE:SBSW) is cash-rich, profitable, undervalued, and pays dividends. The stock is ranked high among the best mid-cap stocks to buy now. As of October 14, Sibanye Stillwater Limited (NYSE:SBSW) is trading at 5x earnings and is offering a forward dividend yield of 6.65%. The company has a trailing twelve-month operating margin of 24.06% and free cash flows of ZAR 10.05 billion.

On September 30, Investec analyst Nkateko Mathonsi upgraded Sibanye Stillwater Limited (NYSE:SBSW) to Buy from Hold and reiterated his price target of ZAR 47. On October 5, Deutsche Bank analyst Abhi Agarwal revised his price target on Sibanye Stillwater Limited (NYSE:SBSW) to $12.50 from $13 and reiterated his Buy rating on the shares.

As of June 30, Condire Investors is the top shareholder in Sibanye Stillwater Limited (NYSE:SBSW). The fund’s stakes in the company are valued at $54.6 million.

Here is what Desert Lion Capital had to say about Sibanye Stillwater Limited (NYSE:SBSW) in its second-quarter 2022 investor letter:

“Sibanye Stillwater is one of the largest PGM (platinum group metal) producers in the world with major operations in South Africa and the U.S. On top of its additional gold mining operations in SA, the business has significant upside optionality in its growing lithium and nickel operations which are not yet contributing to earnings and remain unrecognized by the market in SSW’s price.

PGM and gold prices are lower than a year ago and Sibanye Stillwater’s earnings followed suit. Gold operations made a loss during the period due to a wage negotiation labor strike (see chart on next page). Notwithstanding all these headwinds, the company reported H1 2022 earnings per share of R4.23 which was in line with the six months ended December 2021 EPS…” (Click here to see the full text)

11. Newell Brands Inc. (NYSE:NWL)

Market Cap as of October 14: $6.05 Billion

Number of Hedge Fund Holders: 22

Newell Brands Inc. (NYSE:NWL) designs and manufactures various consumer and commercial products. The company has five divisions: Commercial Solutions, Home Appliances, Home Solutions, Learning & Development, and Outdoor & Recreation. Newell Brands Inc. (NYSE:NWL) has free cash flows of $43 million and a trailing twelve-month operating margin of 10.31% and is one of the best profitable and cash-rich mid-cap stocks to invest in right now. The stock is also trading cheaply relative to earnings and as of October 14 has a trailing twelve-month PE ratio of 8.56 and is offering a forward dividend yield of 6.28%.

On September 7, Raymond James analyst Olivia Tong revised her price target on Newell Brands Inc. (NYSE:NWL) to $23 from $26 and reiterated a Strong Buy rating on the shares. On October 13, JPMorgan analyst Andrea Teixeira revised her price target on Newell Brands Inc. (NYSE:NWL) to $18 from $22 and maintained an Overweight rating on the shares.

At the close of Q2 2022, 22 hedge funds were bullish on Newell Brands Inc. (NYSE:NWL) and held stakes worth $1.46 billion in the company. Of those, Pzena Investment Management was the top shareholder in the company and had stakes worth $715.3 million.

10. Levi Strauss & Co. (NYSE:LEVI)

Market Cap as of October 14: $5.65 Billion

Number of Hedge Fund Holders: 25

On October 6, Levi Strauss & Co. (NYSE:LEVI) announced earnings for the fiscal third quarter of 2022. . The company generated a revenue of $1.52 billion and reported earnings per share of $0.40, beating estimates by $0.03. Levi Strauss & Co. (NYSE:LEVI) is a profitable business and one of the best mid-cap stocks to buy now. As of October 14, the stock is trading at a PE multiple of 10x and is awarding shareholders with a dividend yield of 3.31%. Levi Strauss & Co. (NYSE:LEVI) has free cash flows of $193.4 million and a trailing twelve-month operating margin of 12.79%.

On October 7, JPMorgan analyst Matthew Boss raised his price target on Levi Strauss & Co. (NYSE:LEVI) to $23 from $20 and reiterated an Overweight rating on the shares. This October, Wells Fargo analyst Ike Boruchow revised his price target on Levi Strauss & Co. (NYSE:LEVI) to $19 from $22 and maintained an Overweight rating on the shares.

At the end of Q2 2022, 25 hedge funds were long Levi Strauss & Co. (NYSE:LEVI) and held stakes worth $119.8 million in the company. As of June 30, Broad Bay Capital is the most prominent investor in Levi Strauss & Co. (NYSE:LEVI) and has stakes worth $22.37 million in the company.

9. Foot Locker, Inc. (NYSE:FL)

Market Cap as of October 14: $2.96 Billion

Number of Hedge Fund Holders: 28

Foot Locker, Inc. (NYSE:FL) is a leading retailer of athletic apparel and premium footwear. Wall Street analysts see material upside to Foot Locker, Inc. (NYSE:FL). This August, UBS analyst Jay Sole raised his price target on Foot Locker, Inc. (NYSE:FL) to $39 from $29 and reiterated a Neutral rating on the shares. On August 23, Credit Suisse analyst Michael Binetti raised his price target on Foot Locker, Inc. (NYSE:FL) to $40 from $31 and maintained a Neutral rating on the shares.

Foot Locker, Inc. (NYSE:FL) is trading at bargain levels and is also offering an attractive dividend yield. As of October 14, the stock has a trailing twelve-month PE ratio of 6.41 and is offering a forward dividend yield of 4.98%. Foot Locker, Inc. (NYSE:FL) is one of the best mid-cap stocks to invest in right now.

At the close of the second quarter of 2022, 28 hedge funds held stakes in Foot Locker, Inc. (NYSE:FL). The total value of these stakes amounted to $228.99 million. This is compared to 21 hedge funds in the preceding quarter with stakes worth $177.09 million. The hedge fund sentiment for the stock is positive.

As of June 30, Balyasny Asset Management is the top shareholder in Foot Locker, Inc. (NYSE:FL) and has stakes worth $55.96 million in the company.

Here is what Miller Value Partners had to say about Foot Locker, Inc. (NYSE:FL) in its first-quarter 2022 investor letter:

“Finally, Foot Locker (NYSE:FL) came under significant pressure during the quarter, with the stock down more than 50% from its highs and valuation not far from early 2020 lows. Nike continues to place a greater focus on their Direct-to-Consumer business, which will decrease their contribution to Foot Locker’s total sales, retreating to historical averages of 50% by 2023. While a near-term headwind to sales, management plans to offset the lost business by expanding distribution to other leading brands, rolling out larger neighborhood free-standing stores, and expanding two new growth banners (WSS & Atmos). WSS stores will provide an off-mall presence and focus on the rapidly growing and underserved Hispanic market. Atmos will provide Foot Locker with the ability to expand into Japan and Asia sneaker market with their digitally led business model. These new growth concepts have a combined potential to add more than $1B in sales by 2024. The company’s balance sheet remains very strong with $800M in cash and management is increasing returns to shareholders through raising the dividend by 40% and announcing a $1.2B share buyback (more than 40% of the float at current share prices). With the next 12 to 18 months as a transition period for the company, the share price weakness provides attractive reward/risk investment potential, near 3x Enterprise Value/Earnings Before Income, Taxes, Depreciation, and Amortization (EV/EBITDA) and close to a 30% normalized free cash flow yield.”

8. Toll Brothers, Inc. (NYSE:TOL)

Market Cap as of October 14: $4.67 Billion

Number of Hedge Fund Holders: 29

Toll Brothers, Inc. (NYSE:TOL) is a leading American homebuilder. At the end of the second quarter of 2022, 29 hedge funds were eager on Toll Brothers, Inc. (NYSE:TOL) and held stakes worth $625.8 million in the company. This is compared to 29 positions in the previous quarter with stakes worth $615.99 million. As of June 30, Greenhaven Associates is the largest shareholder in Toll Brothers, Inc. (NYSE:TOL) and has stakes worth $238.9 million in the company.

As of October 14, Toll Brothers, Inc. (NYSE:TOL) is trading at a PE multiple of 5x and is offering a forward dividend yield of 1.80%. The company has a trailing twelve-month operating margin of 13.40% and has free cash flows of roughly $530 million. Toll Brothers, Inc. (NYSE:TOL) is one of the best mid-cap stocks to buy now.

On August 29, Raymond James analyst Buck Horne revised his price target on Toll Brothers, Inc. (NYSE:TOL) to $56 from $75 and reiterated an Outperform rating on the shares. On September 19, KeyBanc analyst Kenneth Zener upgraded Toll Brothers, Inc. (NYSE:TOL) to Sector Weight from Underweight.

Here is what Baron Funds had to say about Toll Brothers, Inc. (NYSE:TOL) in its second-quarter 2022 investor letter:

“Toll Brothers, Inc. is the leading luxury homebuilder in the U.S. Toll Brothers’ shares corrected more than 41% in the first six months of 2022. Its valuation is only 0.9 times tangible book value versus a long-term average of approximately 1.4 times book value and a peak multiple of approximately 2.0 times book value.”

7. Cleveland-Cliffs Inc. (NYSE:CLF)

Market Cap as of October 14: $7.47 Billion

Number of Hedge Fund Holders: 29

Cleveland-Cliffs Inc. (NYSE:CLF) is a leading American iron ore mining company and a flat-rolled steel producer. The stock is presenting an attractive entry point for investors and, as of October 14, is trading at a PE multiple of 2x. The company has free cash flows of $3.17 billion and a trailing twelve-month operating margin of 21.14%. Cleveland-Cliffs Inc. (NYSE:CLF) is ranked high among the best mid-cap stocks to buy now.

This September, B. Riley analyst Lucas Pipes revised his price target on Cleveland-Cliffs Inc. (NYSE:CLF) to $32 from $37 and maintained a Buy rating on the shares. On October 6, Goldman Sachs analyst Emily Chieng revised her price target on Cleveland-Cliffs Inc. (NYSE:CLF) to $19 from $23 and reiterated a Buy rating on the shares.

At the close of Q2 2022, 29 hedge funds disclosed ownership of stakes in Cleveland-Cliffs Inc. (NYSE:CLF). The collective stakes of these hedge funds amounted to $450.9 million. As of June 30, Fisher Asset Management is the most prominent investor Cleveland-Cliffs Inc. (NYSE:CLF) and has stakes worth $166.9 million in the company.

6. The Chemours Company (NYSE:CC)

Market Cap as of October 14: $4.09 Billion

Number of Hedge Fund Holders: 33

The Chemours Company (NYSE:CC) is a leading North American producer and provider of performance chemicals. The company has four business divisions: Titanium Technologies, Thermal & Specialized Solutions, Advanced Performance Materials, and Chemical Solutions. At the end of Q2 2022, 33 hedge funds were bullish on The Chemours Company (NYSE:CC) and held stakes worth $290.5 million in the company.

Wall Street analysts are positive on The Chemours Company (NYSE:CC) and it is one of the best mid-cap stocks to buy now. This September, BMO Capital analyst John McNulty revised his price target on The Chemours Company (NYSE:CC) to $46 from $55 and maintained an Outperform rating on the shares. On October 13, Goldman Sachs analyst Duffy Fischer took coverage of The Chemours Company (NYSE:CC) with a Neutral rating and a $30 price target.

Shares of The Chemours Company (NYSE:CC) have pulled back and are now presenting an attractive entry point for investors. As of October 14, the stock has a trailing twelve-month PE ratio of 4.94 and is offering a forward dividend yield of 3.79%. The company has a trailing twelve-month operating margin of 14.71% and has free cash flows of $500 million.

As of June 30, Sessa Capital is the top shareholder in The Chemours Company (NYSE:CC) and has stakes worth $96.85 million in the company.

Some of the best mid-cap stocks that investors can buy into weakness right now include The Chemours Company (NYSE:CC), Kohl’s Corporation (NYSE:KSS), Builders FirstSource, Inc. (NASDAQ:BLDR), and Alcoa Corporation (NYSE:AA).

Click to continue reading and see 5 Best Mid-Cap Stocks To Buy Now.