We recently compiled a list of the 10 Best Mid Cap Value Stocks To Invest In. In this article, we are going to take a look at where First Horizon Corporation (NYSE:FHN) stands against the other best mid cap value stocks to invest in.
Mid-Cap Stocks are Better in the Near Term
An easing cycle coupled with an upcoming election creates quite the environment for differing opinions to co-exist. On October 9, Jill Carey Hall, Bank of America Global Research head of U.S. small and mid-cap strategy and senior U.S. equity strategist, joined ‘Squawk Box’ on CNBC to discuss her bullish stance on mid-cap stocks, especially in the near term.
Hall stresses that small-cap stocks have been underperforming since the 50 basis point rate cut, going against historical expectations of small-caps performing well in such cases. She emphasized that investors are focused on stocks with stronger fundamentals and small-cap stocks are currently stuck in an earnings recession. We have yet to see a recovery season for small caps, the way we have been seeing it for slightly larger stocks, Carey adds.
READ ALSO: 10 Most Profitable Value Stocks To Invest In and 10 Most Promising Mid-Cap Stocks According to Hedge Funds.
Carey shares that mid-cap stocks are likely to be a “better hedge” in the near term, as they boast stronger fundamentals and have better earnings trends. Overall, she believes that mid-cap stocks have historically performed better than small-caps and are, therefore, a better area to target. She also emphasized that one rate cut is not going to solve the re-financing risk that small-caps, especially companies in real estate and tech, inherently come with.
She adds that investors must focus more on themes rather than specific sectors. However, with the current economic backdrop and a soft landing in sight, she advises investors to remain inclined towards stocks with positive revisions, higher quality, and stronger dividend yields, given that as the Fed continues to cut rates, money is expected to be driven more into equity income.
Carey also shares that the current economic environment has been weak but we may see acceleration after this quarter, keeping in mind that current GDP and jobs data have been “encouraging.” While she upholds an element of uncertainty, she remains focused on less risky and high-quality stocks. As investors look to the Fed as a catalyst for the market, high-quality stocks trading at discounted valuations are likely to reap greater benefits.
Our Methodology
To come up with the 10 best mid-cap value stocks to invest in, we used the Finviz stock screener. We set the market capitalization filter to range between $2 billion and $10 billion and the Forward P/E filter to under 15. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted primarily in ascending order of the number of hedge fund holders as of Q2 2024 picked from our database and secondarily in order of their forward P/E and market capitalization.
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).
A modern office building, showcasing the industry leading finance and taxation services provided by the company.
First Horizon Corporation (NYSE:FHN)
Number of Hedge Fund Holders: 47
Market Capitalization as of October 28, 2024: $9.25 Billion
Forward P/E as of October 28, 2024: 11.4
First Horizon Corporation (NYSE:FHN) ranks first on our list of the best mid-cap value stocks to invest in. The company provides wealth management services, regional banking, and capital markets services. Its products and services encompass banking, borrowing, digital banking, insuring, investing, and trust services.
First Horizon Corporation (NYSE:FHN) is one of the biggest banks in the United States. It has an average daily trading volume of more than $5 billion and has transacted business with more than 50% of all US banks over the past few years, with portfolios amounting to more than $100 million. As of December 31, 2023, the company had over 418 locations across the United States and total assets worth $81.7 billion.
In the third quarter of 2024, First Horizon Corporation (NYSE:FHN) logged $631 million in net interest income and $200 million in fee income, bringing the total revenue for Q3 to $832 million. In addition to that, despite declining short-term rates, net interest income remained stable. The company expects subsequent changes in net interest income as rate cuts are initiated. During the third quarter of 2024, the company grew its client balances by almost $1 billion, with growth momentum particularly coming from the Carolinas, Alabama, and specialty business lines.
Overall, First Horizon Corporation (NYSE:FHN) is one of the best stocks on our list and we say that because of its large customer base, which is constantly expanding, and its strong fundamentals.
Scout Investments, Inc’s Carillon Scout Mid Cap Fund stated the following regarding First Horizon Corporation (NYSE:FHN) in its fourth quarter 2023 investor letter:
“First Horizon Corporation (NYSE:FHN) was the third-largest contributor. This bank holding company rose as the industry rallied due to the investor sentiment shift toward a soft economic landing or continued growth. A soft economic landing, should it occur, means that banks are likely to experience fewer loan losses than in a recession and steadier interest rate margins if extreme interest rate volatility is dampened.”
Overall, FHN ranks 1st among the 10 best mid cap value stocks to invest in. While we acknowledge the potential of FHN 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 FHN 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.