Value stocks are now getting back in favor. It has been almost 7 years of growth and momentum leading the value in returns. This year we have seen significant capital move out of growth and into value. If you are an investor seeking great value investments but you are not fully confident of buying small… [Read More]
Best Mid Cap Stocks to Buy for Value
Mid cap value stocks are often overlooked as investors gravitate towards large stocks or are focused on small cap stocks. Mid capitalization companies are well settled and can provide steady returns and often great dividends. Find the balance between excellent liquidity and profit potential in undervalued mid cap stocks. Our mid cap stocks have market caps between $800 million and $13 billion
Where small cap is typically home to fast growing just out of the gate companies, mid cap segment of the market features mostly companies that have carved out their own niche in a competitive market. We are very likely to see many different competitors jostling for market share. Consumers are not likely to be loyal to any one company, although in some sectors we may have the market divided up between very few players.
For many sectors, the market size is often just large enough to support a few mid capitalization stocks. There are limits to how large these companies can grow, but there are also ways for many of these companies to find new growth markets and grow their revenues and earnings. In most cases, the mid cap companies may still be focused on one product or service. To grow, they may now look to add more services and products or enter new markets altogether.
Some mid cap companies will eventually grow out of this designation by adding new products or acquiring other businesses. They may start to build economies of scale and scope that helps create a competitive advantage and protect their market position. This is often called the moat.
Most of the remaining mid cap companies will stay mid cap or even shrink or die out.
Most value investors find happy hunting grounds among the small cap stocks. Larger value investors such as Warren Buffett, can no longer play in the small cap asset class and they move on to large cap stocks as they find the moat can be more reliable there. Mid cap stocks tend to slip out of value investors' radar, but this is unfortunate.
Existence of a Large Special Situations and Corporate Reorganization Niche
Take for example Seth Klarman of Baupost Fund.
Widely regarded as one of the best value investors of all time, Klarman often sticks to the mid cap stocks and distressed assets where the situation is complex enough to deter casual investors while there is still not enough attention from the Wall Street.
Special situations investing can be very profitable although it is also a very hands on investing process. After all, who has time to make rounds of the bankruptcy courts, or negotiate terms with the management and other debt holders!
This is because you are likely to find mid cap companies in transition. And where there is change, there are scared investors and possible undervaluation
American Eagle Outfitters (Stock: AEO) is a clothing retail brand focused on 15 yr to 25 yr old demographics. They have 3 different retail channels that includes American Eagle stores, their outlet stores and aerie lingerie and apparel. The brand is going through a growth phase as they restructure their business model and look to… [Read More]
Jeremy Grantham from GMO is predicting increasing scarcity of food products and resources that go into farming. This would result in higher prices we pay to buy produce. This is probably not a surprise to most of our readers as I suggested investments in the agriculture sector more than a year ago. So with higher… [Read More]
Knight Capital Group has now merged with Getco and the combined entity, KCG Holdings has relisted on NYSE with the same ticker symbol, KCG, as of July 2, 2013. Knight Capital Group, a formerly public company, and GETCO Holding Company LLC, a formerly private company, now operate as subsidiaries of KCG Holdings Inc, which is… [Read More]
After reporting substantial losses between fiscal years 2005 and 2009, Krispy Kreme Doughnuts (KKD) is now profitable again. The stock is currently selling at multiples that may seem attractive compared to the industry, but in reality it is not. KKD SBUX DNKN P/B 3.52 7.89 11.49 P/S 2.07 2.99 6.11 P/E 5.74 29.02 39.89 … [Read More]
However, rising gold prices are not a given and the shareholders may not necessarily benefit. The problem in making a long term bet on a commodity price is that you can end up being totally wrong. The price of gold, like any commodity, is a result of the demand and supply of the physical material…. [Read More]
Nokia (NOK) started today with the news that it is cutting 10,000 jobs by the end of 2013 and increased its loss guidance for the second quarter. The stock is down to $2.34/share or about 16% on the news. Sadly, this has become a familiar story for Nokia over the last year or so, as… [Read More]
The automotive industry in the US has seen its ups and downs, and while it is resurging now, few years ago it was on life support. Many of the factors that were pulling the sector down, such as weak consumer demand, also affected the replacement tires market. Consumer’s were more likely to wait longer to replace their old tires, where possible. Cooper Tires is one of these tire companies that have seen worse days and is now rebounding with general improvement in the economy, and the economics of their business.
Vishay Intertechnology (VSH) designs, manufactures and sells passive electronic components and discrete semiconductors. The company has grown over the last 5 decades by pursuing a strategy of growth through acquisitions. The current valuation of the company shares may be attractive to a value investor looking to get an exposure in the semiconductor sector. The Value… [Read More]