Although a certain appeal exists in a decisive positional directive, in some cases, a balanced approach is ideal, thus amplifying the relevance of the best mid-cap stocks to buy. Neither too hot nor too cold, these middle-lane enterprises deliver a mix of upside growth opportunities and proven stability. Given the wild circumstances of the wider economy, these names will almost certainly command attention among concerned investors.
Here’s the deal. With the Federal Reserve committed to attacking soaring inflation by raising the benchmark interest rate, recession risks have risen. That’s because the latest hotter-than-expected jobs report indicates that the central bank still has much work left. With higher borrowing costs seemingly a given at this point, the best mid-cap stocks to buy offer significant intrigue.
Under a tightened money supply environment, purely growth-centric names (the small-capitalization firms) present too much risk. However, the blue-chip stalwarts may offer performances too boring for upside-seeking investors. Ultimately, then, the best mid-cap stocks to buy take the best of both worlds. Below are enticing ideas to consider.
Best Mid-Cap Stocks to Buy
West Fraser Timber (WFG)
Headquartered in Vancouver, British Columbia, West Fraser Timber (NYSE:WFG) is a Canadian forestry company that produces lumber and other specialized wood-based products such as pulp and plywood. Currently, West Fraser commands a market cap of 7.86 billion CAD (translating to roughly $5.81 billion). On a year-to-date (YTD) basis, WFG has dipped nearly 24%.
Fundamentally, what justifies the inclusion of WFG among the best mid-cap stocks to buy centers on its overall financial resilience. For instance, the company enjoys a strong balance sheet. Its cash-to-debt ratio stands at 2.65 times, beating out over 80% of sector players. Additionally, its Altman Z-Score is 4.53, reflecting low bankruptcy risk.
On the income front, West Fraser features a three-year revenue growth rate of 15.2%, above 87% of the industry. As well, the company benefits from excellent profit margins across the board. In particular, its gross margin of almost 50% implies potentially robust economies of scale, thus facilitating flexibility.
Finally, analysts rate WFG as a consensus moderate buy based on four buys and two holds. Presently, the average price target is $98.96, reflecting nearly 38% upside (from the time-of-writing price).
IPG Photonics (IPGP)
An American manufacturer of fiber lasers, IPG Photonics (NASDAQ:IPGP) specializes in technologies that are used in a variety of applications including materials processing, medical applications and telecommunications. At the moment, IPG Photonics commands a market cap of $4.52 billion. Admittedly, the narrative presents significant risks for market participants. Since the start of the year, shares have fallen almost 47%.
Nevertheless, IPGP makes an intriguing case for the best mid-cap stocks to buy now. For one thing, the volatility in the back half of the year died down substantially. In the trailing month, shares actually gained a bit over 4%, reflecting a possible early-stage recovery.
On the financials, IPG enjoys excellent stability in the balance sheet, particularly with its cash-to-debt ratio of 57.1 times. While its growth metrics could use improvement, the company makes up for it with solid profit margins.
Finally, analysts rate IPGP as a consensus moderate buy with a price target of $118.75. That’s about a 28% upside from the time-of-writing price. As well, hedge funds have been building up a position in IPGP since the first quarter of 2021.
Louisiana-Pacific (LPX)
Headquartered in Nashville, Tennessee, Louisiana-Pacific (NYSE:LPX) is an American building materials manufacturer. As such, the company offers a contrarian take on the housing market. If you believe in a future building boom, LPX could be your ticket to riches. Presently, Louisiana-Pacific carries a market cap of $4.32 billion. Shares are down nearly 23% YTD.
To be sure, the benchmark S&P 500 is down 20% for the year, meaning that LPX represents an obvious underperformer. Still, shares did gain almost 18% in the trailing six months. Financially, LPX belongs on this list of best mid-cap stocks to buy for its lack of any glaring vulnerabilities. Per GuruFocus, the company features only two yellow flags and no red flags.
Of course, this leaves plenty of positives for investors to mull over. For instance, the company features a solid balance sheet, with an Altman Z-Score of nearly eight. In addition, Louisiana-Pacific enjoys excellent revenue and profit margins. As well, the market prices LPX at four times trailing-12-month earnings, which is extremely undervalued.
Finally, analysts rate LPX as a consensus moderate buy. Wall Street experts anticipate an average price target of $73, reflecting 21% upside.
Silicon Motion Technology (SIMO)
Based out of Taiwan, Silicon Motion Technology (NASDAQ:SIMO) focuses on developing NAND flash controller integrated circuits for solid-state storage devices. At the moment, Silicon Motion features a market cap of $2.1 billion. Since the beginning of the year, SIMO has dropped 33%. However, in the trailing month, shares gained slightly over 4%.
To be sure, Silicon suffered from at least a double whammy (if not more). First, the semiconductor industry suffered from the global supply chain disruption. Second, geopolitical tensions between Taiwan and China cloud SIMO’s overall narrative. Still, Beijing’s move to relax its border restrictions reflects a focus on economic recovery initiatives. And in the long run, this framework should spark normalization trends in the semiconductor space.
Financially, SIMO more than justifies its inclusion as one of the best mid-cap stocks to buy. Primarily, the company features zero debt, affording it incredible flexibility. Also, it features solid revenue growth and strong profit margins. Finally, the market prices SIMO at less than 10 times forward earnings, below the sector median of 16.9 times.
ArcBest (ARCB)
Operating out of Arkansas, ArcBest (NASDAQ:ARCB) is an American holding company for truckload and less-than-truckload freight, freight brokerage, household goods moving, and transportation management companies. Presently, ArcBest commands a market cap of $1.73 billion. Since the beginning of this year, ARCB dropped over 37% of its equity value.
Fundamentally, the contrarian case for ARCB as one of the best mid-cap stocks to buy centers on hopeful economic normalization. Better yet, investors seem to be recognizing this hypothesis as a non-zero probability. In the trailing half-year period, ARCB is up 1%. Also, it’s worth pointing out that according to TipRanks, ARCB features a strong buy consensus rating.
Notably, no analyst currently has a sell rating. As well, the average price target stands at $114.80. That’s a staggering 62.19% upside from the time-of-writing price.
Adding to the enticing profile, GuruFocus labels ArcBest as modestly undervalued. Currently, the market prices ARCB at 7.5 times forward earnings. In contrast, the median for the transportation industry is nearly 12 times.
B2Gold (BTG)
A Canadian mining firm, B2Gold (NYSEMKT:BTG) owns and operates gold mines in Mali, Namibia and the Philippines. Currently, the company carries a market cap of 5.19 billion CAD (or approximately $3.84 billion). Interestingly, BTG has lost less than 4% of its equity value since its January opener. Even better, in the trailing month, shares gained slightly more than 10%.
Fundamentally, this narrative appears to contrast with the Fed’s hawkish policy. Effectively, tightening the money supply translates to the integration of deflationary forces. And deflation usually bodes very poorly for commodities such as precious metals.
However, another overriding factor appears to bolster BTG and its ilk: fear. With many investors concerned about economic stability, they may seek the shelter of assets with intrinsic value. Since most arguably don’t want to carry around bulky bullion, gold miners represent a convenient alternative. Thus, BTG makes for a contrarian case among the best mid-cap stocks to buy.
Also, analysts rate B2Gold as a consensus strong buy. Adding more confidence to the above thesis, TipRanks notes that hedge fund sentiment toward BTG is very positive.
Grand Canyon Education (LOPE)
An interesting but risky case among the best mid-cap stocks to buy, Grand Canyon Education (NASDAQ:LOPE) represents a Christian university. Ideologically, demand may rise for (relatively) affordable private higher education undergirded by strong ethical values. Presently, Grand Canyon carries a market cap of $3.33 billion. Since the start of the year, LOPE gained 22%, largely based on a strong Q3 earnings performance.
At the same time, some concerns exist about buying into positive momentum, especially under these circumstances. Still, the New York Times posted an interesting article that could explain LOPE’s outstanding performance. As a private institution, Grand Canyon can keep its curriculum focused on core subjects.
I’m not making a case for such issues one way or the other. However, people are voting, and they’re voting to keep politics out of academics. That’s a potential catalyst for LOPE.
And while it’s only among three covering analysts, Grand Canyon enjoys a strong buy consensus view. Sure enough, after a big drought, hedge funds are slowly starting to LOPE’s upside proposition.
— Josh Enomoto
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Source: Investor Place