We recently compiled a list of the 7 Most Profitable Mid-Cap Stocks To Invest In. In this article, we are going to take a look at where Bruker Corporation (NASDAQ:BRKR) stands against the other profitable mid-cap stocks.
Inflation Data Raises Concerns
On October 10, the market faced a decline as economic data indicated persistent inflation, as reported by CNBC. The S&P 500 fell by 0.21%, closing at 5,780.05, while the Dow Jones Industrial Average decreased by 57.88 points, or 0.14%, to finish at 42,454.12. The Nasdaq Composite also dipped slightly, ending down 0.05% at 18,282.05.
The market reaction was largely influenced by the Consumer Price Index (CPI) report for September, which showed a monthly increase of 0.2%. This brought the annual inflation rate to 2.4%, slightly above analysts’ expectations of a 0.1% monthly gain and a year-over-year rate of 2.3%. Although this annual figure is the lowest since February 2021, some underlying data suggested stronger inflationary pressures than anticipated.
Luke O’Neill, a portfolio manager at CooksonPeirce, noted that the CPI report was as expected in most respects but highlighted that certain data points were “a little bit hotter than anyone would prefer.” He pointed out that investors were selling off small- and mid-cap stocks that are more sensitive to interest rates.
In response to the CPI report, Atlanta Fed President Raphael Bostic stated he was open to pausing interest rate cuts during the upcoming November meeting. He expressed that the current market fluctuations might warrant a more cautious approach rather than aggressive cuts. However, according to CME Group’s FedWatch Tool, fed funds futures trading data suggests an approximately 85% chance of a quarter-percentage-point cut.
Recent minutes from the Federal Reserve’s last meeting revealed some disagreement among officials regarding the size of September’s rate cut. While the majority supported the cut, some favored a smaller move.
On October 11, Northwestern Mutuals’ Brent Schutte appeared on CNBC’s “Power Lunch” to discuss the CPI report and the market reaction.
Brent Schutte, Chief Investment Officer at Northwestern Mutual, expressed concerns about a potential wage-price spiral, noting that significant wage increases at companies like Amazon and Walmart could contribute to ongoing inflation. He highlighted the Federal Reserve’s challenge in managing this situation, as they often react too late to labor market changes. Schutte pointed out that even with recent rate cuts, inflation remains a concern, particularly with the median CPI rising. He believes the Fed’s path forward will be more complex than investors anticipate, given the persistent inflationary pressures in the economy.
Schutte also expressed concern about the valuations of large-cap stocks, suggesting that the market is in a late-cycle phase. He noted that the economy is currently supported by a narrow segment, particularly manufacturing and lower-income consumers affected by rising interest rates. Schutte believes that small and mid-cap stocks could provide greater value for investors looking for returns over the next 3-5 years, as they are priced for a recession.
Methodology
To compile our list of the 7 most profitable mid-cap stocks to invest in, we used stock screeners from Finviz and Yahoo Finance. First, we defined mid-cap stocks as those with a market capitalization between $2 billion and $10 billion. Next, we focused on profitability by screening for stocks that had a 5-year EPS growth rate of over 10%. We sorted our results based on market capitalization and picked the top 20 stocks.
From this initial list of 20 profitable mid-cap stocks, we further narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years. To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income compound annual growth rate (CAGR) over the past five years, and YCharts, which offered information on TTM net income.
Finally, from this list of mid-cap stocks that met our criteria, we focused on the top 7 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 7 most profitable mid-cap stocks to invest in are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? 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).
A scientist in a laboratory wearing safety gear while operating a mass spectrometry machine.
Bruker Corporation (NASDAQ:BRKR)
TTM Net Income: $352.1 Million
5-Year Net Income CAGR: 13.27%
Market Capitalization: $9.64 Billion
Number of Hedge Fund Holders: 32
Bruker Corporation (NASDAQ:BRKR) is an American manufacturer of high-performance scientific instruments used for molecular and materials research, as well as industrial analysis. The company develops scientific instruments and high-value analytical and diagnostic solutions that enable detailed exploration at molecular, cellular, and microscopic levels, supporting various fields such as life sciences, pharmaceuticals, and industrial applications. The company drives innovation and productivity in areas like microscopy, nanoanalysis, and clinical research.
The company is actively enhancing its market position through its dual strategy of Project Accelerate 2.0 focused on portfolio transformation and operational excellence. Bruker Corporation (NASDAQ:BRKR) is capitalizing on robust demand for its scientific instruments and life science solutions. Additionally, the company continues to benefit from strong orders in semiconductor metrology, which supports high-performance computing trends related to AI.
The recent strategic acquisitions of Chemspeed, NanoString, and ELITech are pivotal to the company’s growth strategy, allowing for expansion into spatial biology, molecular diagnostics, and laboratory automation and digitization.
Bruker Corporation (NASDAQ:BRKR) reported revenues of $800.7 million for the second quarter of 2024, reflecting a 17.4% increase compared to $681.9 million in the same quarter last year. Acquisitions contributed 11.1% to the overall revenue growth.
Over the past five years, Bruker Corporation (NASDAQ:BRKR) has grown its revenue at a compound annual growth rate (CAGR) of 9.61%, while its net income has increased at a CAGR of 13.27% during the same period. Over the past 5 years, the company has also grown its levered free cash flow at a CAGR of more than 22%. BRKR is one of the most profitable mid-cap stocks to invest in.
According to Insider Monkey’s Q2 database of over 900 hedge funds, 32 hedge funds held stakes in Bruker Corporation (NASDAQ:BRKR). The London Company stated the following regarding Bruker Corporation (NASDAQ:BRKR) in its “The London Company SMID Cap Strategy” second quarter 2024 investor letter:
“Bruker Corporation (NASDAQ:BRKR) – BRKR designs and manufactures advanced scientific instruments as well as analytical and diagnostic solutions for a number of differentiated end markets in the life sciences arena. Its solutions enable its customers to explore life and materials at microscopic, molecular, and cellular levels. With a global presence and a focus on life sciences, it benefits from long-term drivers like proteomics research. BRKR derives its competitive moat from its highly innovative instruments that push the cutting edge of science, enabling strong pricing power and market leadership. BRKR’s management team has an excellent track record of capital allocation and delivering on their promises that help create shareholder value. Over time, BRKR has reduced its reliance on government/academic customers, diversified away from Europe, increased growth, and expanded margins meaningfully. BRKR also possesses many characteristics we look for in a company, including a strong balance sheet, high ROIC (>20%), improving margin (close to 20%), and high inside ownership. BRKR is also owned in our Mid Cap portfolio.”
Overall BRKR ranks 4th on our list of the most profitable mid-cap stocks to invest in. While we acknowledge the potential of BRKR as an investment, our conviction lies in the belief that 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 BRKR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.