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Top Investors’ Stock Portfolio: 10 Mid-Cap Stocks To Buy

·9 min read

In this article, we discuss the top mid-cap stocks to buy. You can skip our detailed analysis of the mid-cap stocks and go directly to read the Top Investors' Stock Portfolio: 5 Mid-Cap Stocks To Buy.

Historically, mid-cap stocks have generated better returns in the U.S. as compared with small and large-cap stocks. According to a report published by Fiera Capital, a global asset management firm, the annual average returns of mid-cap stocks stood at 12.45% from 1995 to 2018, compared with 9.9% returns of large-caps and 11.57% for small-caps. Large-cap stocks are companies that have a market cap of over $10 billion, such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Tesla, Inc. (NASDAQ:TSLA), and Amazon.com, Inc. (NASDAQ:AMZN).

S&P 400, a stock market index from S&P Dow Jones Indices which lists the companies for the U.S. mid-cap equities sector, gained 16.1% in 2021. The index returned 36.06% in the past year, compared with the S&P 500’s gains of 27.4% during the same time period. The top 10 companies in S&P 400 account for 6.3% of the index. The industrial sector constitutes 18.2%, while financial, information technology, and healthcare represent 15%, 14.3%, and 10.7% of the index, respectively. As of July 2021, the stocks in the mid-cap benchmark index had an average market cap of $6.2 billion, with the largest company representing 0.7% of the index.

Mid-cap stocks have also been favored by hedge funds over the past few years. Amy Zhang, an executive vice-president of Alger, believes that the mid-cap stocks are expected to surge as the economies around the world reopen after facing a Covid-related hiatus. She further asserted that investors should consider the mid-cap stocks as her hedge fund gained 138% in 2020 by investing in this category.

Our Methodology:

Let's analyze our list of the top mid-cap stocks to buy. The stocks mentioned below are the companies with a market cap of between $2 billion to $10 billion. These are some of the most popular mid-cap stocks among the 873 hedge funds tracked by Insider Monkey.

Why pay attention to hedge fund sentiment while choosing stocks?

Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by wide margins. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Top Investors' Stock Portfolio: 10 Mid-cap Stocks To Buy

10. Axalta Coating Systems Ltd. (NYSE:AXTA)

Number of Hedge Funds: 47

Market Cap: $6.62 billion

Axalta Coating Systems Ltd. (NYSE:AXTA) stands tenth on our list of the top mid-cap stocks to buy. It is an American company that develops coatings for light and commercial vehicles and industrial applications. The company has operations in over 130 countries.

Recently, Axalta Coating Systems Ltd. (NYSE:AXTA) started the construction of its new coating facility in North China, which will produce mobility coatings to support growing demands for light and commercial vehicles. In Q2 2021, Axalta Coating Systems Ltd. (NYSE:AXTA) posted an EPS of $0.48, beating the estimates by $0.02. The company’s revenue for the quarter stood at $1.13 billion, up 73.1% from the prior-year quarter.

This July, Citigroup lifted its price target on Axalta Coating Systems Ltd. (NYSE:AXTA) to $39, while keeping a ‘Buy’ rating on the shares, after the company posted solid Q2 results.

As of Q2 2021, 47 hedge funds tracked by Insider Monkey have positions in Axalta Coating Systems Ltd. (NYSE:AXTA), up from 43 in the previous quarter. The total value of these stakes is $1.48 billion.

Like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Tesla, Inc. (NASDAQ:TSLA), and Amazon.com, Inc. (NASDAQ:AMZN), Axalta Coating Systems Ltd. (NYSE:AXTA) is also favored by investors in 2021.

9. Vimeo, Inc. (NASDAQ:VMEO)

Number of Hedge Fund Holders: 48

Market Cap: $4.81 billion

Vimeo, Inc. (NASDAQ:VMEO) is an American video hosting and sharing company that focuses on delivering high-definition videos across a range of devices. The company ranks ninth on our list of the top mid-cap stocks to buy.

In May 2021, Vimeo, Inc. (NASDAQ:VMEO) reported an 18% growth in its subscribers as compared with the previous year, while during the same month, the company’s total revenue jumped 42% from May 2020. This September, Wells Fargo’s analyst Brian Fitzgerald mentioned that the firm sees a 45% upside in Vimeo, Inc. (NASDAQ:VMEO) as the stock presents an attractive entry point. The firm initiated its coverage on the stock with an ‘Overweight’ rating and a $47 price target.

As of Q2 2021, 48 hedge funds have positions in Vimeo, Inc. (NASDAQ:VMEO), valued at $1.12 billion. There were no hedge fund positions in the company in the previous quarter. Thrive Capital is the company’s largest shareholder, with 5.8 million shares.

Like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Tesla, Inc. (NASDAQ:TSLA), and Amazon.com, Inc. (NASDAQ:AMZN), Vimeo, Inc. (NASDAQ:VMEO) is one of the notable stocks in 2021.

Alphyn Capital Management mentioned Vimeo, Inc. (NASDAQ:VMEO) in its Q2 2021 investor letter. Here is what the firm has to say:

“Clients will notice a new ticker, VMEO, on your brokerage statements following its spin-out from IAC. I profiled IAC’s companies, including Vimeo, in some detail last year. The pandemic accelerated the use of video by both enterprises and small businesses, and I believe this will continue given the high engagement that video generates. The most recent numbers bear this out: May revenues rose 42% from a year earlier while subscriber base and average revenue per user increased 18%. With its comprehensive set of tools to make video creation more accessible, Vimeo has a great opportunity to capture a share of this growth. It further benefits from an attractive customer acquisition funnel – 65% of Fortune 500 enterprises have at least one self-serve Vimeo subscription (with ARPU6 of $250). The company is building out its sales team to help upsell these into enterprise accounts (with ARPU of $12,000). Finally, by buying IAC shares ahead of the spin, we received a long-term, high-growth SAAS “call option” at a much more palatable valuation than the current 20x price-to-sales. Historically, it has been very rewarding to hold onto IAC spins…”

8. The New York Times Company (NYSE:NYT)

Number of Hedge Fund Holders: 48

Market Cap: $8.5 billion

The New York Times Company (NYSE:NYT) stands eighth on our list of the top mid-cap stocks to buy. It is an American mass media company that publishes one of the most critically acclaimed newspapers, The New York Times.

Recently, The New York Times Company (NYSE:NYT) has announced that its popular product review site, The Wirecutter, has been moving to a subscription service, which was free to view before. This is mainly to diversify its subscription base. In Q2 2021, The New York Times Company (NYSE:NYT) posted an EPS of $0.36, beating the estimates by $0.09. The company’s revenue for the quarter stood at $498.5 million, up 23.5% from the prior-year quarter. Recently, Morgan Stanley lifted its price target on the stock to $60, with an ‘Overweight’ rating. In the past year, The New York Times Company (NYSE:NYT) delivered a 12.8% return to shareholders.

Of the 873 hedge funds tracked by Insider Monkey, 48 hedge funds have positions in The New York Times Company (NYSE:NYT) in Q2 2021, valued at $2.22 billion. The number of hedge funds having stakes in the company was the same in the previous quarter.

7. Smartsheet Inc. (NYSE:SMAR)

Number of Hedge Fund Holders: 49

Market Cap: $8.3 billion

Smartsheet Inc. (NYSE:SMAR) is an American technology company that develops Smartsheet applications. The company also offers software services to its consumers. It ranks seventh on our list of the top mid-cap stocks to buy.

In September, BMO Capital lifted its price target on Smartsheet Inc. (NYSE:SMAR) to $90, while keeping an ‘Outperform’ rating on the shares. The firm’s analyst Keith Bachman appreciated the company’s Q2 earnings beat and also raised his FY23 EPS estimates by $0.13, highlighting the company’s market potential. In Q2 2021, Smartsheet Inc. (NYSE:SMAR) posted an EPS of -$0.05, beating the estimates by $0.05. The company’s revenue for the quarter stood at $131.7 million, showcasing a 44.4% year-over-year growth. In the past 12 months, Smartsheet Inc. (NYSE:SMAR) gained 32.1%.

As of Q2 2021, the number of hedge funds having stakes in Smartsheet Inc. (NYSE:SMAR) increased to 49, compared with 39 in the previous quarter. These stakes are valued at $1.48 billion. Alkeon Capital Management is the company’s leading shareholder, with 3.3 million shares.

Like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Tesla, Inc. (NASDAQ:TSLA), and Amazon.com, Inc. (NASDAQ:AMZN), Smartsheet Inc. (NYSE:SMAR) is also one of the stocks gaining hedge funds’ attention in 2021.

6. Paysafe Limited (NYSE:PSFE)

Number of Hedge Fund Holders: 50

Market Cap: $5.17 billion

Paysafe Limited (NYSE:PSFE) stands sixth on our list of the top mid-cap stocks to buy. It is a multinational online payments company. The company offers payment solutions to its consumers in over 40 countries. It has headquarters in London, UK.

Recently, Paysafe Limited (NYSE:PSFE) has partnered with bunq, a Dutch app-based bank, to provide its customers with access to cash services. Through this partnership, the company’s customers would be able to add cash into their bunq accounts. In Q2 2021, Paysafe Limited (NYSE:PSFE) reported revenue of $384.3 million, presenting a 12.7% year-over-year growth.

This August, BofA initiated its coverage on Paysafe Limited (NYSE:PSFE) with a ‘Buy’ rating and a $15 price target, noting the company’s potential to contribute to the growing iGaming market in the U.S. through its iGaming merchants.

As of Q2 2021, 50 hedge funds tracked by Insider Monkey have positions in Paysafe Limited (NYSE:PSFE), compared with 41 in the previous quarter. The total worth of these stakes is $1.12 billion.

Click to continue reading and see the Top Investors' Stock Portfolio: 5 Mid-Cap Stocks To Buy.

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Disclosure. None. Top Investors' Stock Portfolio: 10 Mid-cap Stocks To Buy is originally published on Insider Monkey.