Mid-cap stocks

Quick definition

A mid-cap stock is typically defined as possessing a market cap of $2 billion to $10 billion

Key details

• Mid-cap stocks are stocks with larger market capitalisations than small-cap stocks and smaller market caps than large-cap stocks. 
• Mid-cap stocks come in many different flavours, so you can pick mid-cap stocks that fall under the growth stock, value stock, or dividend stocks.
• Mid-cap stocks are often still relatively early in their growth cycle.

What are mid-cap stocks?

Mid-cap stocks are exactly what they sound like stocks with larger market capitalisations than small-cap stocks and smaller market caps than large-cap stocks. A mid-cap stock is typically defined as possessing a market cap of $2 billion to $10 billion.

What are the defining characteristics of mid-cap stocks?

1) Mid-sized market capitalisation

We mentioned before that mid-cap stocks typically sport a market cap of $2 billion to $10 billion. The next level down is considered a small-cap stock, while the next level up is considered a large-cap stock.

2) Company growth potential

Mid-cap stocks are often still relatively early in their growth cycle. That means investors who buy mid-cap stocks could benefit from an increase in earnings growth, revenue growth, economies of scale, productivity, and market share.

3) Potential for rising stock price

Mid-cap stocks typically have a proven track record, in that they’ve grown from small-cap stocks into larger entities. Despite that established track record of growth, they offer potential for more.

Remember that many of the most successful large-cap stocks in market history were once mid-cap stocks before heading higher.

4) Balance between growth and stability

In a perfect world, investors can maximise their potential to make money while also minimising their risk. Mid-cap stocks can be a viable option when it comes to managing those twin goals since they tend to be less volatile than small-cap stocks but also earlier in their growth cycle than most large-cap stocks.

While nothing is a sure thing when it comes to investing, these traits give mid-cap stocks the potential to achieve superior earnings growth and stock price appreciation if the markets move in the right direction.

What are some examples of mid-cap stocks?

If you want to invest in mid-cap stocks, then here are a few of the best-known companies around that fit the bill. It’s important to carry out your own research before investing your money, but here are some pointers for where to start.

1) Universal Display (OLED)

Universal Display develops and manufactures modern light emitting diode (LED) technology used by display and lighting companies. The stock has a $7.8 billion market cap, having reached an all-time high in September 2019. It fell sharply during the COVID-19 market correction, then rallied nearly 60% from its mid-March lows to its early-June levels.

2) HealthEquity (HQY)

HealthEquity is one of the leaders in the US health savings account space, with a special IRS designation that allows it to be the custodian of health savings accounts no matter which bank holds the funds you use to pay for healthcare. Many US healthcare stocks have rallied sharply during the pandemic given heightened demand in the industry, and HealthEquity is no exception. The stock, which carries a $4.7 billion market share, rose about 60% from mid-March to early-June 2020.

3) Fox Factory (FOXF)

Fox Factory designs, builds, and sells high-performance suspension products used in off-road vehicles such as ATVs, snowmobiles, mountain bikes, and motorcycles. The stock has a $3.4 billion market share and has been incredibly resilient despite the coronavirus-induced market downturn, surging to an all-time high in early June 2020.

4) Kodiak Sciences (KOD)

Kodiak Sciences is a biotech company that makes products and platforms used to prevent and treat the leading causes of blindness. The stock has a $2.7 billion market share and has rebounded to within 30% of its recent January 2020 peak during the post-coronavirus recovery.

How do I find mid-cap stocks?

Numerous investment websites offer screening tools that let you search for mid-cap stocks based on any fundamental or technical parameters you like. You can also find the best mid-cap stocks right here, with our lists of top-performing mid-cap stocks that we publish every month.