In this article, we will discuss the 16 best mid-cap growth stocks to buy now.
50 Basis Point Reduction: Exaggeration or Hidden Benefit?
Recent discussions among financial strategists emphasize the current stock market dynamics, particularly regarding the upcoming US elections. Investors are encouraged to view dips in stocks of some sectors as long-term buying opportunities, as historical trends suggest that 10% corrections can be advantageous entry points.
While recent sell-offs were driven by sector-specific issues rather than broader economic concerns, the long-term outlook remains positive. Despite recession worries, the US economy is stable, with strong consumer performance and corporate profits exceeding expectations. This has contributed to a rebound in the NASDAQ and S&P 500.
Inflation has reportedly dropped to a three-year low of 2.6% in August, marking the lowest rate since March 2021. As inflation continues easing, there has been ongoing speculation that the Fed may begin cutting interest rates, potentially starting with a 25 basis point reduction.
Market analysts, including Gene Goldman and Craig Johnson, anticipate multiple rate cuts due to slowing inflation and economic growth. We discussed this earlier in our article about the 12 Best Small Cap Tech Stocks to Buy. Here’s an excerpt from it:
“Gene Goldman expressed that his base case anticipates 3 rate cuts of 25 basis points each, beginning in September. His belief lies in the slowing inflation, a deceleration in economic growth, and the overall resilience of the economy, which he thinks is not as dire as some reports suggest. Goldman noted that while the labor market showed mixed signals, with both positive and negative data, the market’s expectations for deeper rate cuts may be exaggerated….
Craig Johnson was also of the opinion that a 25 basis point cut is already anticipated by the market, suggesting that a 50 basis point cut could raise concerns among investors. He believes that a series of 25 basis point cuts would align with their perspective. Craig emphasized the importance of staying calm considering that, historically, October has been a strong month for the markets, with gains observed 86% of the time since 1929.”
However, on September 16, Erika Najarian, UBS senior equity research analyst, mentioned that small and mid-cap stocks could potentially benefit from a 50 basis point cut.
Najarian attributes the recent underperformance of financial stocks to market concerns about the implications of potential rate cuts for economic stability, leading investors to question a less favorable economic outlook. She believes some anticipated cuts may already be reflected in money center bank stock prices due to their strong year-to-date performance. A 50 basis point cut could especially benefit mid-cap stocks affected by commercial real estate issues.
She explains that a 50 basis point cut would significantly impact net interest income. Money center banks benefit more from rising rates, while mid-caps are liability-sensitive and may see deposits repriced faster, favoring them if rates are cut aggressively.
The recent Basel III news with lower capital thresholds triggered negative stock reactions, exacerbated by JPMorgan’s comments on reduced investment banking and trading growth targets. Factors included ongoing Basel III discussions since December 2023 influencing pricing, a leading bank suggesting consensus net interest income expectations are too high, casting doubt on other banks, and emerging signs of consumer weakness potentially spreading beyond lower-income segments.
Najarian highlights the challenges analysts face in predicting net interest income due to shifting rate expectations. While higher rates have traditionally benefited bank profitability, potential cuts create uncertainty about financial performance. She points out that banks must choose between cutting rates to remain competitive or maintaining volume, complicating forecasts for net interest income.
As Najarian emphasizes the uncertainty surrounding interest rate cuts and their effects on the financial sector, and investors await clarity from the Fed, we’re bringing you a list of the 16 best mid-cap growth stocks to buy now.
Methodology
We used stock screeners to look for growth stocks trading between $10 billion and $20 billion, our definition of mid-cap stocks. We sorted our screen by market cap and looked through the top 30 stocks that matched our criteria. We then selected 16 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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).
16 Best Mid-Cap Growth Stocks To Buy Now
16. Qorvo Inc. (NASDAQ:QRVO)
Market Capitalization as of September 13: $10.21 billion
Number of Hedge Fund Holders: 37
Qorvo Inc. (NASDAQ:QRVO) is a global technology company created as the result of a merger between TriQuint Semiconductor and RF Micro Devices, now specializing in products for wireless, wired, and power markets. Its products are used in six primary end markets: automotive, consumer, defense and aerospace, industrial and enterprise, infrastructure, and mobile.
Its growth is driven by global megatrends like electrification, connectivity, mobility, sustainability, datafication, and AI — especially as the markets are experiencing multiyear upgrade cycles, including advancements like 5G Advanced, Wi-Fi 6 and 7, DOCSIS 4.0, and Ultra-Wideband.
Resultantly, Qorvo Inc. (NASDAQ:QRVO) recorded a 36.17% year-year-year increase, generating $886.67 million in revenue for the fiscal first quarter of 2025.
In the automotive market, the company in its FQ1 2025 earnings call announced that it will be providing V2X front-end modules (FEMs) for a prominent China-based automotive V2X reference chipset platform. This platform is expected to see significant growth at several automotive OEMs throughout the 2025 calendar year.
Around the same time, it secured a new engagement to supply a switch-mode DC-to-DC charger for a wearable accessory for an Android OEM. It also surpassed 75 million Wi-Fi 6 front-end modules (FEMs) shipped into the Indian Wi-Fi market. Qorvo Inc. (NASDAQ:QRVO) repurchased $125 million of its stock at $101 per share in the quarter.
The company is actively managing its expenses and capital allocation while focusing on long-term growth through strategic investments and share repurchases, making it well-positioned for future success.
Vulcan Value Partners stated the following regarding Qorvo, Inc. (NASDAQ:QRVO) in its Q2 2024 investor letter:
“Qorvo, Inc. (NASDAQ:QRVO) is a leader in radio frequency (RF) systems and power management solutions for mobile devices, wireless infrastructure, aerospace and defense, the Internet of Things, and various other applications. Qorvo’s chipsets are a small cost but are critical components in modern mobile devices. As data needs increase and telecommunications technology continues to evolve and become more complex, more RF content is needed in each device. The complexity and barriers to entry intensify as content requirements increase and space constraints become more pronounced. Qorvo operates in an oligopoly with only a small number of companies capable of producing these increasingly complex chipsets at scale. Qorvo should also benefit as growth accelerates in adjacent markets and these markets eventually become a larger piece of the business through the adoption of the Internet of Things, satellite, Wi-Fi, and other markets. The company has faced headwinds over the past few years including lower demand in China, excess inventory in the channel, and factory underutilization; but secular tailwinds should drive growth and, in turn, margin expansion.”
15. SS&C Technologies Holdings Inc. (NASDAQ:SSNC)
Market Capitalization as of September 13: $18.34 billion
Number of Hedge Fund Holders: 41
SS&C Technologies Holdings Inc. (NASDAQ:SSNC) is a multinational holding company that sells software and software as a service to the global financial services industry. Its solutions are meant to help clients manage their investments, trading, accounting, and regulatory compliance needs, in many financial institutions, including hedge funds, private equity firms, mutual funds, and insurance companies.
In the second quarter of this year, the company bought back 3.7 million shares for $227 million, marking the highest quarterly buyback in its history. The board has approved a new $1 billion stock repurchase program as well.
The revenue in this period was $1.45 billion, exceeding forecasts by $20 million, up 6.53% year-over-year, due to advancements in alternative fund administration and wealth and investment technology. The earnings per share was $1.27. The recurring revenue growth for financial services was 7.7%, which includes all software-enabled services and maintenance revenue.
Acquisitions contributed $4 million and foreign exchange had an impact of $2 million. The growth was also driven by strong performance in alternatives, GIDS, wealth and investment technology, and Intralinks. The GIDS business saw an unexpected boost due to seasonality and accelerated license revenue.
The company’s strong financial stance positions it well for future growth. It is set to leverage its scale and invest strategically in growth opportunities, indicating strong potential for long-term success. This is why it’s one of our top mid-cap stocks to buy now.
Giverny Capital Asset Management stated the following regarding SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) in its fourth quarter 2023 investor letter:
“It’s a bit like two neighbors, both young and with excellent incomes. If one diligently saves a good portion of their income, dollar cost averages regularly into the stock market, pays a little extra on the mortgage every month and avoids credit card debt, while the other dabbles in exotic investments, is on a first-name basis with a local bookie and maxes out credit cards at the holidays, we have a pretty good idea which household will be richer at age 65, no matter who earns more money over their careers.
It’s the same for companies. Earnings power matters, but not more than capital allocation. I thought about this for a while and sold SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) in the third quarter. This is a fine business with a history of making smart acquisitions. But recently the decision to use floating rate debt to finance acquisitions when interest rates were at historical lows has been a costly mistake. SS&C is growing modestly, but its earnings are stagnant because incremental cash flow must be dedicated to higher interest charges.
Selling SS&C and Markel, which were each about 4% of the portfolio, was not easy for me. Both businesses trade for reasonable prices and have good competitive positions. They have strong CEOs who have been in the job for many years. CEO Bill Stone founded SS&C and is a billionaire thanks to his own decisions. Tom Gayner at Markel is a well-regarded stock market investor and a much-admired leader.”
