News and analysis from Standard & Poor’s MarketScope Advisor
Mid-cap stocks seem to suffer from a perennial identity crisis. One the one hand, they are too small to command the dominant positions in large, lucrative markets that large-cap companies typically enjoy, yet they are too big to offer the enormous potential of the young startup. Few investors even agree on what mid-cap stocks are: the Standard & Poor’s MidCap 400 index includes companies with capitalizations between $750 million and $3.3 billion, though many mid-cap funds buy companies with capitalizations of $15 billion or more.
One fact about mid caps, however, is clear: as measured by the Standard & Poor’s MidCap 400, they have outperformed the large-cap S&P 500 and the S&P SmallCap 600 during the first six months of 2010 and calendar 2009. Mid caps are up over the five years to Aug 12, 2010, while both large and small caps are down, and mid caps have beaten large caps over the past 10- and 15-year periods as well. Mid caps have also beaten small caps over the 15-year period, but fell short of small caps over the 10 year period.
Looking forward, S&P equity analysts expect stocks in the S&P MidCap 400 to deliver a 58% average earnings increase for 2010, vs. an expectation of only 46% for the S&P 500 constituents.
Which Should You Consider?
For those intrigued by the strong performance mid-cap stocks have delivered, there are hundreds of mid-cap mutual funds available, and with chatter getting louder about a possible “double dip” recession in the future, it makes sense to look at the value side.