In this article, we discuss 16 best mid-cap stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Mid-Cap Stocks To Buy Now.
Mid-cap stocks have a market capitalization between $2 billion to $10 billion, and these firms are considered to have established operations and increasing profits. They offer a desirable balance between stability and growth prospects, providing investors with higher growth prospects compared to large-cap firms, but with more stability and a lower risk profile than small-cap companies.
According to Hennessy Funds, data shows that in any given one-year rolling period since 2000, small-, mid-, and large-cap stocks have outperformed 41%, 35%, and 25% of the time, respectively. Additionally, over the past 20 years, mid-cap stocks outperformed small- and large-cap stocks 67% of the time in any given 10-year period. The data also indicates that over the 20-year period ending December 31, 2022, investors in mid-cap stocks had a higher return and lower risk compared to investors in small-cap stocks. While mid-cap stocks had higher risk than large-cap stocks, the returns for mid-cap investors were still higher over the same period. The S&P MidCap 400 index reflects the trend mentioned earlier, as it has outperformed both the S&P 500 and the S&P SmallCap 600 for the majority of the past 20 years.
On December 29, 2022, Chris Harvey, Wells Fargo Securities head of equity strategy, told CNBC that the firm is bullish on the services sector in 2023. Consumers will move from spending on goods to spending on experiences, as per Harvey. He believes that the environment in 2023 will be more conducive to growth, and he is leaning towards mid-cap growth plays.
Mid-cap companies may be overlooked by the market, which can provide opportunities for investors to invest in undervalued stocks with significant growth potential. Some of the best mid-cap stocks to buy include WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Bill.com Holdings, Inc. (NYSE:BILL), and Antero Resources Corporation (NYSE:AR).
Our Methodology
We scanned Insider Monkey’s database of holdings of 920 elite hedge funds tracked as of the end of the third quarter of 2022 and picked the top 16 mid-cap stocks — companies which have market capitalizations of between $2 billion and $10 billion — as of February 6. That means the stocks mentioned in the article are the most popular mid-cap stocks among the elite hedge funds operating in financial markets. The list is arranged in ascending order of the number of hedge fund holders in each firm.
Photo by Adam Nowakowski on Unsplash
Best Mid-Cap Stocks To Buy Now
16. Masimo Corporation (NASDAQ:MASI)
Number of Hedge Fund Holders: 38
Market Cap as of February 6: $8.907 billion
Masimo Corporation (NASDAQ:MASI) is a California-based company that develops, manufactures, and markets non-invasive monitoring technologies and hospital automation solutions worldwide. On January 11, Stifel analyst Rick Wise increased the price target for Masimo Corporation (NASDAQ:MASI) to $170, keeping a Buy rating on the stock after the favorable ruling by the US International Trade Commission in the patent dispute with Apple. The analyst believes this is the first of three critical steps towards final resolution and that the outcome of the dispute could result in a ban on importing certain Apple Watch models into the US, which would benefit Masimo.
According to Insider Monkey’s data, 38 hedge funds were bullish on Masimo Corporation (NASDAQ:MASI) at the end of September 2022, compared to 31 funds in the prior quarter. Terry Smith’s Fundsmith LLP is the largest stakeholder of the company, with 765,161 shares worth $108 million.
Like WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Bill.com Holdings, Inc. (NYSE:BILL), and Antero Resources Corporation (NYSE:AR), Masimo Corporation (NASDAQ:MASI) is one of the best mid-cap stocks to invest in.
Ensemble Capital made the following comment about Masimo Corporation (NASDAQ:MASI) in its 2022 annual investor letter:
“Masimo Corporation (NASDAQ:MASI) (4.43%* weight in Fund): Masimo fell 59%, contributing -2.56% to the Fund’s relative performance. In February, Masimo announced the surprising acquisition of consumer audio company Sound United causing the stock to fall 35% on the day of the announcement. While Masimo has long communicated their intention to bring their hospital based, health sensor technology into the home as part of their mission to lower the cost of healthcare and improve patient outcomes, their acquisition of Sound United was an unexpected approach to executing this strategy. Compounding investors’ concerns, Masimo declined to offer a detailed explanation of the Sound United acquisition, stating that in order to avoid alerting competitors to their intentions they would explain the deal at an Investor Day currently scheduled for December 2022.”
15. Signify Health, Inc. (NYSE:SGFY)
Number of Hedge Fund Holders: 40
Market Cap as of February 6: $8.337 billion
Signify Health, Inc. (NYSE:SGFY) was founded in 2017 and is headquartered in Dallas, Texas. The company runs a healthcare platform that employs analytics, technology, and networks of healthcare providers in the US. It operates through two segments – Home & Community Services and Episodes of Care Services. On January 11, Signify Health, Inc. (NYSE:SGFY) announced a partnership with Prospect Medical, a healthcare services company that operates 16 hospitals serving disadvantaged communities in four states. Signify Health will assist Prospect’s facilities with customized population health plans based on data analysis, as well as pricing that aligns with their economic goals. Signify Health, Inc. (NYSE:SGFY) is one of the best mid-cap stocks to buy now.
According to Insider Monkey’s third quarter database, Signify Health, Inc. (NYSE:SGFY) was part of 40 hedge fund portfolios, up from 18 in the prior quarter. Alec Litowitz and Ross Laser’s Magnetar Capital is the biggest stakeholder of the company, with 2.7 million shares worth $80.6 million.
14. DISH Network Corporation (NYSE:DISH)
Number of Hedge Fund Holders: 40
Market Cap as of February 6: $8.003 billion
DISH Network Corporation (NYSE:DISH) is a Colorado-based company that provides pay-TV services in the United States. The company operates in two segments, Pay-TV and Wireless. On January 17, DISH Network Corporation (NYSE:DISH) priced a $1.5 billion offering of 11.75% senior secured notes due 2027, to be issued at an issue price of 102% of the principal amount. The notes are in addition to the $2 billion offering of 11.75% senior secured notes due 2027 announced in November. The offering closed on January 26. DISH Network Corporation (NYSE:DISH) is one of the best mid-cap stocks to invest in.
On January 10, Goldman Sachs analyst Brett Feldman reinstated coverage of DISH Network Corporation (NYSE:DISH) with a Neutral rating and a $14 price target. He believes that DISH Network Corporation (NYSE:DISH)’s wireless initiatives pose significant risks in terms of execution and may take longer to scale than anticipated by the company. Additionally, he expects the trend of cord-cutting to increase, putting further stress on Dish’s pay-TV business. This could make it challenging for the company to secure capital at favorable terms, the analyst wrote in a research note to investors.
According to Insider Monkey’s third quarter database, 40 hedge funds were long DISH Network Corporation (NYSE:DISH), compared to 41 funds in the last quarter. Boykin Curry’s Eagle Capital Management is the largest position holder in the company, with 17 million shares worth $237 million.
Here is what ClearBridge Investments has to say about DISH Network Corporation (NASDAQ:DISH) in its Q2 2021 investor letter:
“Portfolio holdings in the communication services and financials sectors also made strong contributions. Dish Network continues to make progress on the buildout of its greenfield 5G network, with Las Vegas slated to become the first market launched later this year. The company gained credibility, and its stock reacted favorably, after it announced a partnership with Amazon to deploy a 5G cloud-native network using AWS’s cloud infrastructure. While the stock has been volatile in recent quarters, we continue to feel confident in Dish’s long-term prospects, which include competing as a fourth U.S. wireless carrier. Charter Communications has been executing well and benefiting from the growth in residential broadband, which has been accelerated by COVID-19 and should see further support from the Biden Administration’s infrastructure bill, which earmarks $65 billion for broadband buildout. In addition, we expect the company to continue to grow its wireless business, leveraging its mobile virtual network operator (MVNO) relationship with Verizon. The company continues to generate strong and growing free cash flow and deploys it toward consistent and material share buybacks.”
13. Williams-Sonoma, Inc. (NYSE:WSM)
Number of Hedge Fund Holders: 40
Market Cap as of February 6: $9.352 billion
Williams-Sonoma, Inc. (NYSE:WSM) is a California-based specialty retailer that manufactures and markets cooking, dining, and entertaining products under the Williams Sonoma Home, Williams Sonoma Lifestyle, Pottery Barn, West Elm, Pottery Barn Kids, Pottery Barn Teen, Rejuvenation, and Mark and Graham brands. Williams-Sonoma, Inc. (NYSE:WSM) is one of the top mid-cap stocks to monitor. On December 15, the company declared a quarterly dividend of $0.78 per share, in line with previous. The dividend is payable on February 24, to shareholders of record on January 20.
On December 13, Needham analyst Anna Andreeva initiated coverage of Williams-Sonoma, Inc. (NYSE:WSM) with a Hold rating and no price target. The analyst mentioned that while the company’s sales per store have increased by 70% and EBIT margins have doubled, the outlook for the home furnishings market is uncertain.
According to Insider Monkey’s Q3 data, Williams-Sonoma, Inc. (NYSE:WSM) was part of 40 hedge fund portfolios, compared to 31 in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 1.07 million shares worth $126.8 million.
Here is what Voss Capital has to say about Williams-Sonoma, Inc. (NYSE:WSM) in its Q1 2022 investor letter:
“We believe shorting furniture retailers has arguably become a consensus view on the back of widely known tough comps from early 2021 (+26% and +40% SSS Comps for WSM in calendar Q1/Q2 ‘21) and fear of pull forward of demand, which seems to be corroborated by weak credit card data in the category the last few weeks and a poor outlook from furniture e-Commerce giant Wayfair, not to mention a panic-inducing, rambling conference call from the oft colorful CEO of Restoration Hardware. Lazy thematic macro analysis that stops there, however, paints an incomplete picture of what has transpired at many individual companies like WSM that have been deemed COVID beneficiaries that are now at all-time low valuations.
WSM is a furniture and home décor retailer that owns several well-known brands: William Sonoma, Pottery Barn, Rejuvenation, Mark & Graham, and most importantly, west elm. While perhaps thought of as a dying mall-based brick & mortar retailer, WSM derives the vast majority (66%+) of its revenue from e-Commerce and has been a remarkably steady performer, remaining free cash flow positive every year since at least 2007 and achieving positive same store sales comps since 2010, including +17% in 2020, +22% in 2021 with guidance for a further mid-to-high single digit growth again this year. Within the overall positive sales trends, west elm’s consistent growth has been even more impressive, with a 16% average annual same-store sales growth rate since 2012. To little fanfare, by our calculation, WSM has become the single highest quality retailer in public markets with a 58% return on invested capital (ROIC) in 2021 and a 39% ROIC on average over the past 3 years…” (Click here to see the full text)
12. KBR, Inc. (NYSE:KBR)
Number of Hedge Fund Holders: 41
Market Cap as of February 6: $7.008 billion
KBR, Inc. (NYSE:KBR) is a Texas-based company that offers scientific, technology, and engineering solutions to governments and commercial customers worldwide. The company operates through Government Solutions and Sustainable Technology Solutions segments. On January 3, KBR, Inc. (NYSE:KBR) announced that its Vinyl Acetate Monomer (VAM) technology has been selected by Asian Paints Limited for a new production facility in India. KBR, Inc. (NYSE:KBR) will provide licensing for the technology, basic engineering, proprietary equipment, and catalysts for the facility, which has a capacity of 100,000 tons per year. The VAM technology is offered in partnership with Showa Denko K.K. of Japan.
On December 21, Truist analyst Tobey Sommer raised the price target on KBR, Inc. (NYSE:KBR) to $68 from $64 and maintained a Buy rating on the shares. The analyst is optimistic about the company’s successful protection of the important HomeSafe contract and sees potential for shares to rise based on KBR’s sum-of-the-parts valuation and attractive growth prospects in the Sustainable Technology Solutions segment.
According to Insider Monkey’s data, 41 hedge funds were long KBR, Inc. (NYSE:KBR) at the end of Q3 2022, and Lauren Taylor Wolfe’s Impactive Capital is the biggest stakeholder of the company, with 4.3 million shares worth $188 million.
11. Jazz Pharmaceuticals plc (NASDAQ:JAZZ)
Number of Hedge Fund Holders: 43
Market Cap as of February 6: $9.8 billion
Jazz Pharmaceuticals plc (NASDAQ:JAZZ) was incorporated in 2003 and is headquartered in Dublin, Ireland. It is a biopharmaceutical company that identifies, develops, and commercializes pharmaceutical products for various unmet medical needs in the United States, Europe, and internationally. On January 19, Jazz Pharmaceuticals plc (NASDAQ:JAZZ) and Zymeworks Inc. (NASDAQ:ZYME) announced that Zanidatamab, a potential treatment for gastroesophageal adenocarcinoma, showed an 84% overall survival rate at 18 months when used as a first-line option with chemotherapy.
On December 8, Goldman Sachs analyst Madhu Kumar upgraded Jazz Pharmaceuticals plc (NASDAQ:JAZZ) to Buy but lowered the price target to $190 from $192. The upgrade is based on the positive outlook on operating margin performance and the potential for multiple positive factors such as increased demand and global expansion of Rylaze, acceleration of the launch of Xywav in idiopathic hypersomnia, and the global launch of Epidiolex.
According to Insider Monkey’s data, 43 hedge funds were long Jazz Pharmaceuticals plc (NASDAQ:JAZZ) at the end of the third quarter of 2022, compared to 40 funds in the last quarter. Bernard Horn’s Polaris Capital Management is the largest stakeholder of the company, with 1.47 million shares worth $196 million.
10. Alcoa Corporation (NYSE:AA)
Number of Hedge Fund Holders: 44
Market Cap as of February 6: $9.333 billion
Alcoa Corporation (NYSE:AA) is a Pennsylvania-based company that produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Iceland, Norway, Brazil, Canada, and internationally. On January 18, Alcoa Corporation (NYSE:AA) paid a cash dividend of $0.10 per share of common stock, totaling $17 million, and the company finished the fourth quarter with a cash balance of $1.4 billion. It is one of the best mid-cap stocks to consider.
On February 1, UBS analyst Andreas Bokkenheuser raised the firm’s price target on Alcoa Corporation (NYSE:AA) to $50 from $44 but kept a Neutral rating on the shares. The analyst believes that expectations of a strong recovery in Chinese property activity driving the recent metals rally won’t materialize, based on recent consumer surveys and data.
According to Insider Monkey’s third quarter database, 44 hedge funds were bullish on Alcoa Corporation (NYSE:AA), compared to 39 funds in the prior quarter. Jim Simons’ Renaissance Technologies is the largest stakeholder of the company, with 4.17 million shares worth $140.5 million.
ClearBridge Investments made the following comment about Alcoa Corporation (NYSE:AA) in its Q3 2022 investor letter:
“We bought Alcoa Corporation (NYSE:AA), a leading aluminum producer, after the stock sold off over lower commodity prices. The current price of aluminum is unsustainably low, below its cost of production, despite inventories being at historic lows. We believe these depressed prices are due to the evaporation of Chinese demand resulting from its zero COVID-19 policy, but that it will likely recover over the next few quarters.
Additionally, Alcoa is leading the industry in reducing carbon emissions from its smelting process which is helping to improve its cost position relative to global competitors. Given its compelling valuation and strong free cash flow yield, we are confident in the company as it is increasingly relied upon to meet the growing structural demand from electrification and the global energy transition.”
9. IAC Inc. (NASDAQ:IAC)
Number of Hedge Fund Holders: 45
Market Cap as of February 6: $4.999 billion
IAC Inc. (NASDAQ:IAC) is a New York-based media and internet company that produces original digital content, including articles, illustrations, videos, and images, covering a variety of topics such as entertainment, food, home, beauty, travel, health, family, luxury, and fashion, as well as magazines focused on women and lifestyle. IAC Inc. (NASDAQ:IAC) announced on January 11 that total Dotdash Meredith revenue grew at a sharp pace of more than 500% year-over-year for the first eleven months of 2022.
On December 13, Citi analyst Ygal Arounian initiated coverage of IAC Inc. (NASDAQ:IAC) with a Buy rating and a $60 price target. Despite the negative effects of the current macro environment on the consumer, the analyst believes that the share performance and reduced estimates already reflect this challenge. With multiple values “still near lows in many cases”, the analyst sees a favorable risk/reward opportunity for the sector in 2023.
According to Insider Monkey’s Q3 data, 45 hedge funds were bullish on IAC Inc. (NASDAQ:IAC), compared to 39 funds in the prior quarter. Dennis Hong’s ShawSpring Partners is the largest stakeholder of the company, with 3.50 million shares worth nearly $194 million.
Alphyn Capital made the following comment about IAC Inc. (NASDAQ:IAC) in its Q4 2022 investor letter:
“Most of what I wrote about IAC Inc. (NASDAQ:IAC)in the third quarter letter remains applicable: the DotDash-Meredith merger is tracking behind expectations partly because of the more difficult advertising environment, partly because of a few hiccups with the integration, which should be largely behind the company. Moreover, IAC released encouraging data showing that as they migrate former Meredith internet properties to the DotDash platform, traffic initially takes a hit before eventually returning to solid growth and surpassing prior levels from the 6-month mark onwards. On this basis, they are optimistic for the second half of 2023. It is too early to tell how Mr. Levin’s direct leadership of Angi has improved performance, and I will monitor it going forward. In the meantime, MGM continues to be a solid investment for IAC, and there have been hints that under IAC’s ownership, some of the private and earlier stage companies are doing well. E.g., Care.com has grown revenues by 70% since IAC acquired it.”
8. Comerica Incorporated (NYSE:CMA)
Number of Hedge Fund Holders: 45
Market Cap as of February 6: $9.874 billion
Comerica Incorporated (NYSE:CMA) provides financial products and services and operates through Commercial Bank, Retail Bank, Wealth Management, and Finance segments. Comerica Incorporated (NYSE:CMA) was founded in 1849 and is headquartered in Dallas, Texas. It is one of the best mid-cap stocks to invest in. On January 19, the company reported a Q4 GAAP EPS of $2.58 and a revenue of $1.02 billion, outperforming Wall Street estimates by $0.03 and $10 million, respectively. Revenue over the period climbed 36% year-over-year.
On January 23, Truist analyst Jennifer Demba maintained a Buy recommendation on Comerica Incorporated (NYSE:CMA) but lowered the firm’s price target on the shares to $78 from $83 after its Q4 results. The analyst predicts that loan growth will slow down to mid-single digit pace in the next few quarters due to a slower economy and a decline in mortgage banker loan demand. However, she also noted that Comerica Incorporated (NYSE:CMA)’s credit quality is still strong and will likely result in lower loan losses compared to peers in a stressed environment.
According to Insider Monkey’s data, 45 hedge funds were long Comerica Incorporated (NYSE:CMA) at the end of September 2022, compared to 38 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest stakeholder of the company, with 2.3 million shares worth $169 million.
7. Lithia Motors, Inc. (NYSE:LAD)
Number of Hedge Fund Holders: 45
Market Cap as of February 6: $7.907 billion
Lithia Motors, Inc. (NYSE:LAD) was founded in 1946 and is headquartered in Medford, Oregon. It operates as an automotive retailer in the United States, running through three segments – Domestic, Import, and Luxury. On January 23, Lithia Motors (NYSE:LAD) announced that it is reportedly in talks to acquire Jardine Motors, a Ferrari dealer, for around £300 million. The potential acquisition of Jardine Motors would give Lithia Motors a strong presence in the UK, with access to luxury car brands such as Ferrari and Maserati. It is one of the best mid-cap stocks to monitor.
On January 13, Wells Fargo analyst Colin Langan downgraded Lithia Motors, Inc. (NYSE:LAD) to Equal Weight from Overweight with a price target of $233, up from $212. The analyst expects gross margins to decline to their long-term averages as they are currently at record highs. He is also concerned about normalization in gross margins for both the used and F&I segments. The analyst sees a balanced risk-reward profile for Lithia Motors, Inc. (NYSE:LAD) stock considering its current share price.
According to Insider Monkey’s Q3 data, 45 hedge funds were bullish on Lithia Motors, Inc. (NYSE:LAD), compared to 40 funds in the prior quarter. David Abrams’ Abrams Capital Management is the largest stakeholder of the company, with 2.35 million shares worth $504.4 million.
Here is what Oakmark Select Fund has to say about Lithia Motors, Inc. (NYSE:LAD) in its Q1 2022 investor letter:
“As is typical during periods of significant volatility, we added a new name to the portfolio. Lithia Motors (NYSE:LAD) is the largest franchised auto dealer group in the United States. The company has a long history of creating shareholder value through best-in-class operations and consistent acquisitions of smaller dealers at attractive returns. There is a long runway for management to continue creating value through such acquisitions. Management believes this will drive earnings per share to more than $50 by 2025, even as car prices return to pre-pandemic levels. Meanwhile, Lithia has a significant opportunity to further accelerate growth through Driveway, its online auto retailing platform. We believe Lithia’s existing nationwide infrastructure provides Driveway with significant competitive advantages in e-commerce, which smaller dealers will struggle to replicate. Driveway is not generating any earnings today, but it could become a major contributor over the next five to seven years. With the stock priced at less than 7x management’s 2025 EPS target and with substantial future growth potential from Driveway, we believe Lithia shares are a bargain today.”
6. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 46
Market Cap as of February 6: $9.105 billion
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. The company operates through six segments – Retail, Texas, East, West, Sunset, and Asset Closure. Vistra Corp. (NYSE:VST) operates 38,700 megawatts of power generation assets that cover a range of energy sources, from coal to renewables. The company paid a $0.194 per share quarterly dividend to shareholders on December 29, an increase of 4.9% from its prior dividend of $0.184. The dividend yield came in at 3.37% on February 6.
According to Insider Monkey’s third quarter database, 46 hedge funds were bullish on Vistra Corp. (NYSE:VST), compared to 42 funds in the last quarter. Howard Marks’ Oaktree Capital Management is the largest stakeholder of the company, with 25.4 million shares worth $533.4 million.
In addition to WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Bill.com Holdings, Inc. (NYSE:BILL), and Antero Resources Corporation (NYSE:AR), Vistra Corp. (NYSE:VST) is one of the best mid-cap stocks to buy according to hedge funds.
Legacy Ridge Capital made the following comment about Vistra Corp. (NYSE:VST) in its Q4 2022 investor letter:
“I sent the 2019 letter on February 10, 2020. Vistra Corp. (NYSE:VST) closed that day at $22.27. As I write in early January the price is $22.30. Now I did say “We would actually prefer it if both (VST & NRG) securities went nowhere for as long as possible”—assuming repurchased shares at depressed valuations was our best-case scenario. But A) I didn’t think I’d be that right with respect to “nowhere”, and B) I certainly didn’t think I’d be right 3-years on. Here we are though, with the stock literally going nowhere for the last 3-years. Just like we drew it up!
“Management has indeed repurchased 20.3% of the shares outstanding since year-end 2019 and will probably repurchase another 12-15% of the outstanding shares in 2023. My initial assumption was that management could plausibly repurchase 60% of their shares by 2030, leaving them with 200mn outstanding (that assumed shares were appreciating and they had to pay more as the years went on, not what’s transpired so far), but at the current pace of about 50mn shares repurchased per year, they’ll hit that mark by the end of 2026, which would imply free cash flow of $10 per share if the underlying business continues to perform as it currently is. That’s a 45% FCF yield on today’s price. Meanwhile, dividends per share have grown 54% since 2019 and the stock now yields 3.5%, growing about 15% a year.
Being paid to wait makes waiting much easier. We had sold VST shares in mid-2020, replacing some of the position with call options, to free up capital for other opportunities that became available. But when winter storm Uri hit Texas in February 2021 and VST shares went down 20%+, below $17 a share, we rebuilt our common equity position. Today VST oscillates between the biggest and second biggest position in the fund, depending on weekly performance.”
Click to continue reading and see 5 Best Mid-Cap Stocks To Buy Now.
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Disclosure: None. 16 Best Mid-Cap Stocks To Buy Now is originally published on Insider Monkey.
