Mid-Cap Stocks Have Reigned in 2009
Mid-cap stocks have been anything but middling in 2009.
They've been the sweet spot for investors still leery of the large-cap stocks that burned them in the recent past. Too many big-name companies also seem to be offering only downsizing as a strategy these days.
With large caps and small caps garnering all the attention, mid caps usually fall between the cracks.
Yet mid-cap growth funds are up 34 percent and mid-cap value funds up 31 percent this year, according to
"Mid-cap stocks are a neglected part of the market, a well-kept secret not a lot of investors know about," said
Mid-cap (which stands for middle capitalization) stocks are loosely defined as those of companies with capitalizations between
"Mid-cap companies can still be nimble like their small-cap counterparts and aren't as bloated as the larger companies," said
With money now heading to more aggressive investments such as junk bonds; emerging market stocks and bonds; and smaller stocks, noted Grittinger, mid-cap stocks offer a modestly aggressive possibility. A mid-cap company typically has a better management team, more financial liquidity and greater opportunity to raise capital through loans and initial public offerings than the small-cap counterparts.
"Mid-cap companies have had good strong earnings and many have beaten the estimates," observed
Mid-cap portfolio managers sometimes have a blend of mid-cap and small-cap stocks but won't venture into large-cap territory, Roseen said. Only if a portfolio manager has a strong buy-and-hold philosophy will a mid cap that has grown into a large cap be kept.
Here are some mid-cap stocks priced right and worthy of investment, according to Scout Mid Cap's Dunkerley:
"We do rigorous fundamental research on companies, and we like a strong liquidity position, strong cash flow, strong balance sheet, good valuation and a strong catalyst to drive growth," said Dunkerley. "We really don't like 'gotchas' like bad management or litigation."
Roseen sees a number of mid caps positioned to do well. In technology, he points out
Turning to mid-cap funds, Grittinger especially likes
"Unlike many mid-cap growth mangers, Berghuis does pay attention to valuations, and that appeals to us," said Grittinger, also noting that solid balance sheets and diversity of industries are hallmarks of that fund's holdings. "Growth at any price is a loser's game."
The largest holdings in its 141-stock portfolio include
Mid caps do not produce boxcar results like 2009 every year. For example, Scout Mid Cap has a three-year annualized return of 3.15 percent, and T. Rowe Price Mid Cap Growth is down a fraction for the three-year period.
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Investing - Mid-Cap Stocks Have Reigned in 2009
(c) 2009 Andrew Leckey