Dolby Laboratories, Inc. (DLB), Amphenol Corporation (APH): The Road to Short-Circuiting Your Portfolio?

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Getting into mid-cap stocks is a weird place. On the one hand, they tend to have less room to grow than their tiny counterparts. While Dolby Laboratories, Inc. (NYSE:DLB) is only a $3.2 billion company by market cap, it’s still larger than a lot of companies and is thus less likely to experience a huge upsurge in spite of turning 26% profit margins that could easily go into making sound dampening and audio compression even better. Plus, after almost 60 years in the sound innovation business, it’s hard to imagine that Dolby Laboratories, Inc. (NYSE:DLB) is suddenly going to skyrocket in value in spite of its relatively low P/E ratio as of this writing.

Dolby Laboratories, Inc. (NYSE:DLB)If anything, Dolby Laboratories, Inc. (NYSE:DLB) might just be stuck in the doldrums between the bootstrapping startup and the picture perfect success story. It’s a strange place for a company to be.

Midcap stocks are a mixed bag because they also don’t offer the reasonable security that larger companies do. After all, Molex Incorporated (NASDAQ: MOLX) isn’t Wal-Mart Stores, Inc. (NYSE: WMT). While there is very little correlation between companies that aren’t heavily debt laden and their stock prices, there is a certain comfort to knowing that a lot of other people trust and value the company enough to make it huge and pricey. In today’s market, a $4.8 billion market cap isn’t too pricey, even if it’s trading for almost double book value and over 17 times earnings.

Molex sells over 100,000 products. Is that not enough to completely dominate everything network switch-related, or is that too much of a disorderly pile to properly delve into a market that could use a serious provider of one great thing? My knee jerk response would be to say “who can make 100,000 things well?” Off the top of my head, it seems like Post Holdings and J&J fit the bill fairly nicely as far as companies that somehow hold together insane numbers of different offerings.

It’s not even as if Molex and its like are simply toiling away in obscurity working for back-end-of-nowhere companies. Since its early days Molex has been working with the like of GE, and it even produces military hardware. So there’s definitely money coming in feeding those roughly 7% profit margins.

Maybe the difference is that mid-cap companies have a less public face than their larger or more ambitious counterparts.

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