Mid-Cap Value Stock

What Is a Mid-Cap Value Stock?

A mid-cap value stock has been identified by industry analysts as a decent choice for value investors at its current price per share. Mid-cap indicates that it is a moderate-sized company in terms of its total market capitalization.

How Mid-Cap Value Stocks Work

Given the huge number of stocks, investors use a variety of methods to categorize and make sense of the opportunities available to them.

One of the most common categories used by investors is company size. Another is the investment strategy that they seem best suited to address.

Market Capitalization

Companies are typically categorized by their total market capitalization. This is simply its current share price multiplied by the number of outstanding shares of the stock.

They can then be categorized as large-cap, mid-cap, or small-cap stocks. Some investors utilizing extra terms, for example, mega-cap and micro-cap to refer to especially large and small companies.

Investment Style

The issue of investment style is more relevant to the strategy of the potential investor than to the stock. Investors generally recognize the strategies of value investing and growth investing.

Value investors aim to buy shares of stocks that are selling at less than their intrinsic value — that is, for less than they are worth. Of course, individual investors differ in their assessments of intrinsic value as well as in their methods for coming to this end result.

Common examples of valuation methods used by value investors include financial ratios, for example, the price-to-earnings (P/E) and price-to-book-value (P/B) ratios; discounted cash-flow analysis (DCF), and qualitative assessments of a company's competitive advantages.

Growth investors, meanwhile, are more concerned with the future prospects of a company as well as its current momentum in market trading. Companies that are perceived to have growth prospects could benefit from favorable tailwinds, as investor enthusiasm encourages a developing pool of investors to bid up the share price. In some cases, special circumstances, for example, an upcoming product send off or an unexpected earnings beat could feed enthusiasm among growth investors.

Combining Mid-Cap and Value

In light of this, a mid-cap value stock is a stock that is appealing to value investors and is of middling size based on its market capitalization.

As a general rule, larger companies will tend to have greater coverage by analysts and the media. All that attention means they might be less likely to have a big difference between market price and intrinsic value.

Hence, many value investors believe that the best investment opportunities are generally found among small and mid-cap value stocks.

Example of a Mid-Cap Value Stock

Investors who need to gain exposure to mid-cap value stocks have several methods at their disposal. Those who are willing and able to conduct their own research can search for companies physically utilizing tools like stock screeners. Passive investors can likewise rely on third-party indexes, mutual funds, and exchange-traded funds (ETFs) which will permit them to invest in a diversified portfolio of mid-cap value stocks utilizing a single investment vehicle.

One popular example of a mid-cap value stock investment is the Mid-Cap Value Index Fund Admiral Shares offered by Vanguard. Trading under the ticker symbol VMVAX, its ten largest holdings as of Q1 2021 included:

1. Occidental Petroleum Corp.
2. Valero Energy Corp.
3. Nucor Corp.
4. Corteva Inc.
5. Welltower Inc.
6. Dollar Tree Inc.
7. Motorola Solutions Inc.
8. Kroger Co.
9. Arthur J. Gallagher and Co.
10. Consolidated Edison Inc.

Features

• Mid-cap value stocks have been identified as potential great choices for value investors, who search for stocks trading at a current price that is well below their intrinsic value.
• The value stock is one of several broad categories that define the risk levels and reward potential of investment candidates.
• Companies are categorized as small-cap, mid-cap, or high-cap depending on their current total market capitalization.