Is 2025 the Year of the Mid-Cap Stock Renaissance?
As traders, we’re always on the lookout for the next big trend that could boost our portfolios. While the spotlight has mainly been on large-cap tech stocks and the small-cap stocks that promise explosive growth (although they often underdeliver), 2025 could serve up a substantial opportunity in the often-overlooked mid-cap stock sector. Mid-caps—companies with market values ranging from $2 billion to $10 billion—are stepping into the limelight as they seem to be the hidden gems of the market right now.
The Current Market Landscape
The lowdown is that the S&P 500 is currently trading at around 22 times projected earnings for next year, a number that’s practically dancing on a 20-year high. This raises flags regarding the sustainability of these high valuations. Meanwhile, the small-cap sector may appear affordable at first glance, but with only 60% of small-cap companies turning a profit recently, the “cheap” label comes with significant risks and uncertainties.
Why Mid-Caps? The Attractive Metrics
Now, let’s talk metrics. The popular iShares Core S&P Mid-Cap ETF trades at a much more attractive 16 times projected earnings for 2025, which puts mid-caps firmly in the sweet spot of valuation versus potential growth. Analysts project that mid-cap stocks will see profit growth of approximately 13% in 2025. While this may not directly outperform the S&P 500’s anticipated 14%, it gives mid-caps an edge given their relatively favorable pricing. Speaking of pricing, let’s not forget the robust fundamentals that many of these companies sport, particularly in comparison to their small-cap counterparts. Better balance sheets often lead to better performance amid rising long-term interest rates.
Institutional Bullishness: Bank of America and J.P. Morgan Weigh In
Analysts from BofA Securities, led by Jill Carey and Nicolas Woods, have officially declared it’s “mid-cap’s time to shine.” They emphasize that these companies—with solid financial stability—are in a better position to endure economic shifts. On a similar note, J.P. Morgan has recently identified a bullish outlook for mid-cap stocks, citing advantages for domestically-focused companies as the U.S. adapts to President-elect Donald Trump’s tariff agenda.
Highlighted Stocks to Watch
Some mid-caps popped up on J.P. Morgan’s radar include:
- Amphastar Pharmaceuticals (Pharmaceuticals)
- Dundee Precious Metals (Gold Mining)
- Dole (Fruit Company)
Especially intriguing is Dole, which trades at a mere 9 times 2025 earnings and is expected to post earnings growth of about 15%. With a 12% free-cash-flow yield and a rapidly deleveraging balance sheet, this fruit powerhouse looks ripe for the picking.
Performance Metrics: Schwartz Value Focused Fund
Let’s not overlook the Schwartz Value Focused Fund, which boasted a remarkable 39% return in 2024, making it the top-performing mid-cap blend fund in Morningstar’s database. This fund has been loading up on energy sector stocks like Texas Pacific Land Corp and Devon Energy, both of which have shown robust growth potential.
Case for Yeti
One particularly notable stock within the fund is Yeti Holdings, which hit the market in 2018 with impressive growth only to drop sharply in 2022 when sales growth plateaued. Timothy Schwartz, co-manager of the fund, argues Yeti is ripe for a comeback. Trading at just 13 times expected 2025 earnings, he believes that after initially underestimating the company’s growth potential, investors are overlooking it now. With its high-single to low-double-digit growth trajectory, Yeti could very well be the sleeper hit in your portfolio.
In Conclusion: Action Steps for Today
As traders, we must pivot our strategies to capitalize on emerging trends. The mid-cap sector is positioned well for 2025 and offers a refreshing alternative amidst the noise of larger players. Monitor the stocks discussed here and consider allocating a portion of your portfolio to this sector. With lower valuations, appealing growth rates, and a bullish outlook from analysts, mid-caps could very well redefine your trading success.
Stay agile, keep your charts up-to-date, and remember: the next big trend might just be waiting in the mid-cap shadows!