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 companies. 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 Mid-Cap stocks in NASDAQ
You may download the full list of NASDAQ Mid Cap stocks here
Advantages of the Mid-Cap Stocks
There are several different advantages of the Mid -Cap Stocks providing the opportunity for the investors. Portfolio of the investor should be well-diversified and in that portfolio, some percentage of the mid-cap stocks or the mutual funds should also be there. Some of the advantages of the Mid -Cap Stocks are as follows:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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 of the Mid-Cap Stocks
The Limitations or the drawbacks of the mid-cap stocks include the following:
- 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.
- 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.
- Mid-cap stocks generally suffer from liquidity constraints because of the smaller capital base of these companies.
- Mid-cap is the concept or the term which is given to companies having a market capitalization between $2 billion and $10 billion.
- Portfolio of the investor should be well-diversified and in that portfolio, some percentage of the mid-cap stocks or the mutual funds should also be there as they provide the balance of the growth and the stability.
- 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.
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, profitability, 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.
This has been a guide to what are Mid-Cap Stocks and its Definition. Here we discuss examples and list of mid-cap stocks along with advantages and disadvantages. You can learn more about Accounting from the following articles –