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 The Mosaic Company (NYSE:MOS) 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).
Heavy machinery at work in a mining facility, excavating the earth for rare earth minerals.
The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 34
Market Capitalization as of October 28, 2024: $8.67 Billion
Forward P/E as of October 28, 2024: 11.2
The Mosaic Company (NYSE:MOS) is a chemicals company that mines and processes phosphate and potash minerals into crop nutrients to help feed the world. The company owns a range of products such as performance fertilizers, advanced crop nutrition, and commodity offerings.
The Mosaic Company (NYSE:MOS) serves customers in more than 40 countries and employs more than 13,000 people across six countries. In addition to that, the company also made contributions worth $12 million to the community. Aligning with its corporate social responsibility, the company increased the adoption of 4R nutrient stewardship practices on more than 6 million acres in North America.
In the second quarter of 2024, the company generated $2.8 billion in revenues, experiencing a slight decline due to decreasing selling prices. Gross margin stood at 14% in the second quarter of 2024. Despite a slight financial downturn, the company is working immensely on cost reduction initiatives that were introduced last year. The Mosaic Company (NYSE:MOS) has achieved more than one-third of the targeted $150 million run rate relative to 2023. In addition to that, the company is also on course to reduce 2024 capital expenditures by $200 million from 2023 levels.
Overall, 34 hedge funds held stakes in MOS at the close of Q2 2024, positioning Mosaic Company (NYSE:MOS) as one of the best mid-cap value stocks to invest in. Analysts are also bullish on the stock and their median price target implies an upside of 12% from current levels.
Ariel Investments’ Ariel Focus Fund stated the following regarding The Mosaic Company (NYSE:MOS) in its first quarter 2024 investor letter:
“There were a few notable performance detractors in the quarter. Shares of producer and marketer of crop nutrients, The Mosaic Company (NYSE:MOS), declined in the period, as weaker than expected phosphates and fertilizer volumes as well as higher raw material and production costs weighed on the bottom-line. Management reiterated expectations for tight global grain and oilseed markets in 2024 and believe growers will continue to be incentivized to maximize yields by applying fertilizers. Meanwhile, MOS is focused on cost discipline, free cash flow generation and paying down debt, while continuing to return significant capital to shareholders through buybacks. Given management’s disciplined approach towards capital allocation, we continue to believe the company is well positioned from a risk/reward standpoint.”
Overall, MOS ranks 6th among the 10 best mid cap value stocks to invest in. While we acknowledge the potential of MOS 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 MOS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
