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 sharesOutstanding Number Of SharesOutstanding shares are the stocks available with the company's shareholders at a given point of time after excluding the shares that the entity had repurchased. It is shown as a part of the owner's equity in the liability side of the company's balance sheet.read more 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.

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Source: Mid-Cap Stocks (wallstreetmojo.com)

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 the 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

Mid Cap Stocks List - NASDAQ

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

Advantages

  1. During the business cycleBusiness CycleThe business cycle represents the expansion and contraction of the economy that occurs due to ups and downs in the gross domestic product (GDP) of a country. It is experienced over the long term and goes parallel with the natural growth rate.read more 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 a 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. It 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, 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 the market disappears, then they will also have to shut down their operations.
  2. The return generated from investing in the Mid-cap funds gives less amount of return on the investment made when compared with the small-cap fund.
  3. Mid-cap stocks generally suffer from liquidity constraints because of the smaller capital base of these companies.

Important Points

  1. Mid-cap is the concept or the term which is given to companies having a market capitalization between $2 billion and $10 billion.
  2. The portfolio of the investor should be well-diversified. In that portfolio, some percentage of the mid-cap stocks or the mutual fundsMutual FundsA mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks.read more should also be there as they provide the balance of the growth and the stability.
  3. 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.

Conclusion

Mid-Cap Stocks are the stocks of the company having a market capitalization between $2 billion and $10 billion. Typically mid-cap stocks are in the middle of their curve of the growth, with the expectations that the market share, profitabilityProfitabilityProfitability refers to a company's ability to generate revenue and maximize profit above its expenditure and operational costs. It is measured using specific ratios such as gross profit margin, EBITDA, and net profit margin. It aids investors in analyzing the company's performance.read more, and productivity will increase over the period of time. It falls in the middle of the large-cap and small-cap companies.

The classifications are only the approximations that may change over the period of time. As the Mid -Cap companies are generally in their growth stage, so they are considered to be less risky when compared with the small caps (market capitalization of less than $ 1-2 billion). However, when compared with the large-caps, mid-caps have more risk.

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