Mid Cap Stocks

The term “mid cap” stands for “middle capitalization.” Mid-cap stocks usually have a market capitalization between $2 billion and $10 billion. These stocks can be beneficial because they have more potential for growth than large-cap stocks but are usually more transparent and stable than small-cap or micro-cap stocks.

Are you thinking about adding a few of these stocks to your portfolio but aren’t sure which are worth your money? Our guide to them will help you identify these stocks, evaluate their financials and choose which to invest in. We’ll also introduce you to a few mid-cap stocks that investors keep their eyes on for this year. 

Quick Look at the Best Mid-Cap Stocks

• Digital Turbine Inc
• SPS Commerce, Inc.
• Silicon Laboratories Inc
• Crocs
• Teledyne Technologies

Overview

The “cap” in mid cap refers to a company’s total market capitalization. You can calculate a company’s market capitalization by multiplying the total number of outstanding shares of stock by the current share price. Most investors consider these stocks to have market capitalizations between $1 billion and $10 billion. 

Companies with market capitalizations below $1 billion are typically considered small-cap stocks, while companies with market capitalizations above $10 billion are usually referred to as large-cap stocks.

Mid-caps offer a few benefits over large-cap and small-cap companies. These stocks are established businesses, which makes them easier to find information on. This means that it’s much more difficult for these companies to fall into price manipulation schemes or to hide financial data. 

Mid-caps are also small enough to show more year-after-year growth than large-cap stocks, which can make them a great choice for investors with limited funds and who want more potential for profit. The right stocks add a level of diversification to your portfolio without the high level of risk that often accompanies small-cap and penny stocks. 

Best Online Brokers for These Stocks

No matter if you’re looking for stocks with the highest potential for growth or you’re only interested in stocks under $5 for short-term gains, you’ll need to place your buy and sell orders through a broker. If you don’t already have a brokerage account, consider a few of our favorite online brokers below. 

Features to Look for in Mid-Cap Companies

Like large-cap stocks, it’s easy to find analysis and financial information on most mid-cap stock. Look for these 3 essential characteristics before you invest.

• A history of yearly growth: Unlike large-cap stocks, mid-cap stock have the potential to significantly grow their operations on a yearly or even monthly basis. When you search for mid-cap companies to invest in, look for ones that have a proven track record of growth.
• A positive earnings per share value: A company’s earnings per share (EPS) value is calculated by dividing the current revenue minus dividends by the total number of outstanding shares. A mid-cap company might have some debt, especially for the first few years on the market. However, if a company has a positive EPS, it means that the debt is under control and the corporation is remaining profitable.
• A safe, sustainable dividend yield: If you’re investing to create a passive stream of income, you might turn to dividend-producing mid-cap stock because they tend to be more affordable than their large-cap counterparts. While it can be tempting to shop for stocks only by their annual dollar payout, you should instead pay attention to the dividend yield.
• Quality management: Quality management of any stock means that you are more likely to see the results that you want. While nothing is a sure thing, a proper management team and solid management style can make all the difference.

A company’s dividend yield is equal to the current annual dividend divided by its current share price. A dividend yield above 10% may indicate that the dividend is unsustainable and may be cut in the near future. 

Adding Mid Cap Stocks to Your Portfolio

These stocks can make an exciting addition to any portfolio. No matter if you’re ready to invest hundreds of dollars or you’re simply looking for stocks under $10, remember that these stocks can be riskier than investing in large-cap stocks or total market index funds. 

If you do decide to add a few of these stocks to your portfolio, try to search for stocks within a few different industries to limit your risk.