Mid-Cap Stocks

Mid-Cap Stocks Definition

Mid-cap stocks are the shares of the public companies which have the market capitalization between $2 billion and $5 billion. According to some analysts companies having the market capitalization of as large as the $10 billion are also considered to be the mid-cap.

Market capitalization is the measure of the company’s market value which is calculated by multiplying the outstanding number of shares of the company with its stock price. It falls in the middle of the large-cap and small-cap stocks. The classifications are only the approximations that may change over the period of time. The investors find the mid-caps appealing because it is expected they will grow in the future and increase the profits, share in the market and productivity.

Example of the Mid-Cap Stocks

For example, Company XYZ Ltd. has the $ 1000,000 outstanding shares in the market and the price of one share of the company is $4 per share. Market capitalization is the measure of the company’s market value which is calculated by multiplying the outstanding number of shares of the company with its stock price. So the market capitalization of Company XYZ Ltd. is $ 4000,000 ($ 1000,000 * $4). Since market capitalization of the company XYZ ltd is $ 4 billion which is between the ranges required for being the mid-cap stock company i.e., between $ 1 billion to $ 10 billion, so the stocks of the Company XYZ ltd will be the mid-cap stocks.

List of Mid Cap Stocks in NASDAQ

Below is the partial list of such stocks in NASDAQ

You may download the full list of NASDAQ Mid Cap stocks here

Advantages

  1. During the business cycle expansion phase, mid-cap companies perform well as the growth of these companies is generally stable with the low-interest rates and cheap capital. Because of this, it becomes easy for the managers of the mid-cap to get low-cost loans whenever required in order to fulfill the rising demand. They generally grow either through the investment in capital equipment, acquisitions or mergers.
  2. Mid-cap companies in the market are less risky and less volatile when compared with small-cap companies. In case if any economic downturn comes in the economy then it is less likely that the mid-cap companies will go bankrupt and this is not the case with the small-cap companies which are more likely to go bankrupt in case of any economic downturn.
  3. When the data of the past years is seen, it is observed that in history the Mid-Cap Stocks have outperformed when compared with both small-cap stocks and the large-cap stocks and Small-Cap and trends is not expected to change in anytime soon. Like the S&P Mid-Cap Index gave $2,684 in return for every $1,000 amount invested by the investors in it.
  4. It is easy to get the data and information about the mid-cap companies when compared with the small-cap companies because mid-caps companies have been there around for longer period than the smaller companies which makes it easier to get their more information through research. Also, the mid-cap companies have been there in the business for a long period for avoiding any blunders which are usually made by the small-cap companies.
  5. Stocks of the mid-cap companies are underfollowed in the stock market when compared with the large-cap stocks. This gives a huge opportunity to investors who make wise decisions for growing their investment at a great pace.
  6. In case the large-cap companies decide to buy the mid-cap companies that the investment in the mid-cap can give a good return if the switch is generous as in that case investors might get it mid-cap shares converted to large-cap stock.

Disadvantages

  1. The mid-cap companies are not as stable as the large-cap company as they do not have much capital so that they can last through any economic downturn coming making them riskier in the contraction phase of the business cycle. Also usually they are focused on one business type or market type and in case that market disappears then they will also have to shut down their operations.
  2. Het rendement dat wordt gegenereerd door te investeren in de mid-capfondsen, geeft minder rendement op de gedane investering in vergelijking met het small-capfonds.
  3. Midcapaandelen hebben doorgaans te kampen met liquiditeitsbeperkingen vanwege de kleinere kapitaalbasis van deze bedrijven.

Belangrijke punten

  1. Midcap is het concept of de term die wordt gegeven aan bedrijven met een marktkapitalisatie tussen $ 2 miljard en $ 10 miljard.
  2. De portefeuille van de belegger moet goed gediversifieerd zijn en in die portefeuille moet ook een bepaald percentage van de mid-capaandelen of de onderlinge fondsen aanwezig zijn, aangezien ze het evenwicht tussen de groei en de stabiliteit bieden.
  3. De investeerders vinden de midcaps aantrekkelijk omdat verwacht wordt dat ze in de toekomst zullen groeien en de winst, het marktaandeel en de productiviteit zullen vergroten.

Gevolgtrekking

Mid-capaandelen zijn de aandelen van het bedrijf met een marktkapitalisatie tussen $ 2 miljard en $ 10 miljard. Doorgaans bevinden midcap-aandelen zich in het midden van hun groeicurve, met de verwachting dat het marktaandeel, de winstgevendheid en de productiviteit in de loop van de tijd zullen toenemen. Het valt in het midden van de large-cap en small-cap bedrijven.

De classificaties zijn slechts de benaderingen die in de loop van de tijd kunnen veranderen. Aangezien de Mid-Cap-bedrijven zich over het algemeen in hun groeifase bevinden, worden ze als minder risicovol beschouwd in vergelijking met de small-caps (marktkapitalisatie van minder dan $ 1-2 miljard). In vergelijking met de largecaps hebben midcaps echter meer risico.