The 3 Most Undervalued Mid-Cap Stocks to Buy Now: August 2023
Mid-cap stocks are firms with a total market capitalization that falls in the middle of the overall range. Traditionally, many investors group companies with a market cap of between $2 billion and $10 billion into the mid-cap range.
Mid-cap stocks can lead to more favorable returns for investors because they fall into a sweet spot. They are small enough to have dramatic upside potential. However, unlike small-caps, they tend to already be well-established and have proven their abilities to generate consistent profits and cash flow.
What sorts of mid-cap stocks are the most compelling today? These are three to buy for August 2023.
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Zions Bancorporation (ZION)
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Zions Bancorporation (NASDAQ:ZION) is a unique commercial-focused bank operating primarily in Rocky Mountain states such as Utah. Headquartered in Salt Lake City, it operates as a commercial bank, providing services to small- and mid-sized businesses. These business owners, in turn, tend to maintain non-interest-bearing accounts at Zions branches as part of their customer relationship, which gives them access to loans and lines of credit.
ZION stock collapsed earlier this year as traders feared that these deposits would flee the bank. In theory, with all the attention on rising interest rates, depositors could have moved their funds to high-yield savings accounts at rival banks.
However, this hasn’t happened. In fact, as of June 30, 2023, Zions’ total deposits increased $5.1 billion, or 7%, from
March 31, 2023, due to increases from both brokered and customer deposits. It turns out that Zions’ long-term relationship banking creates customer loyalty and holds up during an economic shock.
ZION stock has bounced from a 52-week low of $18 to $38 now as analysts appreciate Zions’ stability amid the current regional banking storm. That said, shares traded as high as $60 last year; there’s plenty of upside left as things normalize. Shares go for just eight times forward earnings and offer a 4.3% dividend yield today.
Grupo Aeroportuario del Centro Norte (OMAB)
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Grupo Aeroportuario del Centro Norte (NASDAQ:OMAB) is a Mexican airport operator. It runs 13 airports primarily in northern Mexico; its crown jewel is in the large industrial city of Monterrey and other notable holdings include Acapulco, Ciudad Juarez and Reynosa.
Monterrey has been a key hub for the reshoring movement. Following the pandemic, many companies have moved production away from China and toward other markets, with Mexico being a major beneficiary. Thanks to cheap labor, shared cultural ties, easy transportation options and a new free trade agreement, Mexico and the United States are natural economic allies.
In fact, Mexico surpassed China in total trade volumes with the U.S. earlier this year. It’s even gotten to the point that even many Chinese companies are now relocating production to Mexico to avoid getting locked out of the U.S. market altogether.
This is fantastic news for Centro Norte. Its flagship airport in Monterrey is enjoying a traffic boom as new factories from the likes of Tesla (NASDAQ:TSLA) and Hershey (NYSE:HSY) open in that city. All this leads to more airplane flights and more profits. OMAB stock sells for less than 15 times forward earnings. That’s a bargain price for a firm that has grown earnings more than 12%/year compounded throughout the past decade.
National Storage Affiliates (NSA)
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National Storage Affiliates (NYSE:NSA) is a real estate investment trust focused on self-storage units.
The industry in general, and National Storage in particular, has grown rapidly in recent years. For its part, NSA was founded in 2013 and has already grown to generating more than $800 million in annual revenues today. This comes both from rising demand overall and NSA’s aggressive mergers and acquisition strategy.
However, the run-up in NSA stock has been interrupted. In fact, shares are down by roughly half since their 2021 peak. This comes primarily due to the surge in interest rates. Investors tend to sell off high yield stocks when interest rates on risk-free alternatives such as government bonds increase. In addition, National Storage has to pay more interest on its debt due to higher rates.
These are real headwinds to National Storage’s near-term valuation. That said, the selling is way overdone. At this price, NSA stock goes for just 12 times price-to-funds from operations (FFO). Shares yield 6.8%. This and the other listed companies are great mid-cap stocks for you to consider.
On the date of publication, Ian Bezek held a long position in ZION, OMAB, HSY, and NSA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
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