In this piece, we will take a look at the 13 best mid-cap value stocks to buy now. If you want to skip our introduction to mid-cap and value investing, and how it might benefit from the current environment, then take a look at the 5 Best Mid-Cap Value Stocks to Buy Now.
The stock market’s overall performance as a collection of stocks is dependent on a variety of factors. While sector specific fluctuations depend on industry specific forces, as a whole, stocks tend to thrive when the business climate is friendly and pare back their returns in an uncertain environment. When it comes to the American stock market in 2023, there is still a lot of uncertainty that refuses to go away due to historic economic and political crises that continue to feed uncertainty into the market.
A weakening economy or troubling indicators drive shares down – a performance that might be unrelated to a firm’s underlying fundamentals. Fundamentals, for those out of the loop, are financial indicators such as earnings per share or revenue that enable analysts to paint a financial picture of a company to see whether its shares reflect the underlying value. Firms whose shares are trading higher than the underlying value are categorized as overvalued and those with the opposite trend are called undervalued.
The simple premise behind investing in undervalued stocks is that their share prices should appreciate in the future and provide the prudent investor with juicy returns. This approach is so popular that one of the biggest investors of our time, Warren Buffett of Berkshire Hathaway, is a known follower of this philosophy. Mr. Buffett takes a deep look at a firm’s business model to determine whether it is a leader in the market, as part of determining a company’s economic moat. This moat is a combination of qualitative and quantitative factors that determine whether a company has a sustained competitive advantage in its industry. Should this economic moat be present, and the intrinsic value of a firm be lower than its market price, then the shares are bought and then held over decades to slowly grow the stake. This is the fundamental logic of value investing, and we’ve taken a detailed look at Warren Buffett’s value stocks as well as stocks with wide economic moats.
For instance, our analysis of the 15 Cheapest Stocks Warren Buffett Owns revealed that the firms with the lowest price to earnings ratio in his latest investment portfolio are Citigroup Inc. (NYSE:C), Ally Financial Inc. (NYSE:ALLY), and General Motors Company (NYSE:GM). Additionally, stocks with wide economic moats that are also popular among hedge funds include Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOGL). You can take a look at the full list of these stocks by clicking at 13 Best Wide Moat Stocks To Buy According To Hedge Funds.
Shifting gears, investing in mid-cap stocks come with several advantages. Mid-cap companies are those whose market capitalization ranges between $2 billion and $10 billion. These are sizeable and stable firms with relatively mature business processes and operations. At the same time, their share prices and market capitalization are lower than those of mega cap and large cap stocks, which opens up the potential for large percentage returns. Finally, mid-cap stocks are also somewhat guarded against market manipulation by unscrupulous players as the higher share prices when compared to small cap and micro cap stocks make manipulating the price by buying shares in bulk quite difficult and a journey that only the most ambitious scammers would try to undertake.
Finally, one reason that value stocks might be the right play these days is due to the prevailing economic uncertainty in the United States. America has battled historic inflation in 2022, and even though the Federal Reserve’s stunning interest rate hikes have calmed things down, inflation continues to surprise industry watchers. Wall Street is divided about the timeline of the Fed’s interest rate reduction, and as long as this uncertainty persists, stocks will continue to be depressed. In other words, their share prices will be affected by factors not strictly associated with the firm’s fundamentals, and this is where picking the right undervalued stocks can provide some sweet returns once the economic clouds disappear.
With these details in mind, let’s take a look at some best mid-cap value stocks, out of which the top picks are Jabil Inc. (NYSE:JBL), Chesapeake Energy Corporation (NASDAQ:CHK), and Tenet Healthcare Corporation (NYSE:THC).
Photo by Ruben Sukatendel on Unsplash
Our Methodology
To compile our list of the best mid-cap value stocks to buy, we ranked the top 30 companies part of the Vanguard S&P Mid-Cap 400 Value ETF by the number of hedge funds that had bought their shares during this year’s second quarter. Out of these, the top mid-cap value stocks are as follows.
Best Mid-Cap Value Stocks to Buy Now
13. United States Steel Corporation (NYSE:X)
Number of Hedge Fund Investors in Q2 2023: 33
United States Steel Corporation (NYSE:X) is one of the oldest companies on our list since it was set up in 1901. The firm sells finished steel products in the U.S. and Europe. The firm is currently expanding its production base to meet the demands of electric vehicles, and it opened a new plant in Arkansas in October to this effect.
Insider Monkey took a look at 910 hedge fund holdings for their Q2 2023 investments and discovered that 33 were United States Steel Corporation (NYSE:X)’s investors. Out of these, the firm’s largest shareholder is Paul Marshall and Ian Wace’s Marshall Wace LLP since it owns 6.1 million shares that are worth $153 million.
Along with Chesapeake Energy Corporation (NASDAQ:CHK), Jabil Inc. (NYSE:JBL), and Tenet Healthcare Corporation (NYSE:THC), United States Steel Corporation (NYSE:X) is a top mid-cap value stock.
12. Reinsurance Group of America, Incorporated (NYSE:RGA)
Number of Hedge Fund Investors in Q2 2023: 34
Reinsurance Group of America, Incorporated (NYSE:RGA) is an insurance company that offers health, life, and other products. A strong interest rate environment has helped the firm beat analyst EPS estimates in three out of its four latest quarters and the shares are rated Buy on average.
As of June 2023, 34 out of the 910 hedge funds polled by Insider Monkey had held a stake in the insurance firm. Reinsurance Group of America, Incorporated (NYSE:RGA)’s biggest investor in our database is Natixis Global Asset Management’s Harris Associates since it owns $289 million worth of shares.
11. Ciena Corporation (NYSE:CIEN)
Number of Hedge Fund Investors in Q2 2023: 35
Ciena Corporation (NYSE:CIEN) is a hardware and software company that provides equipment and technology for communications networks. The firm’s third quarter earnings saw it beat analyst EPS estimates by eight cents, and the report sent its shares soaring on the stock market.
Insider Monkey dug through 910 hedge funds for their second quarter of 2023 investments and found that 35 had bought and owned Ciena Corporation (NYSE:CIEN)’s shares. Richard Mashaal’s Rima Senvest Management is the largest shareholder among these due to its $96.3 million stake.
10. XPO, Inc. (NYSE:XPO)
Number of Hedge Fund Investors in Q2 2023: 35
XPO, Inc. (NYSE:XPO) is an American trucking company headquartered in Greenwich, Connecticut. The firm provides shipping services all over North America and in Europe. Its shares are rated Strong Buy on average, and analysts have set an average price target of $81.50.
As of June 2023, 35 out of the 910 hedge funds part of Insider Monkey’s database were the firm’s investors. XPO, Inc. (NYSE:XPO) ‘s biggest hedge fund stakeholder is Farhad Nanji and Michael Demichele’s MFN Partners which owns 12.6 million shares that are worth $747 million.
9. Capri Holdings Limited (NYSE:CPRI)
Number of Hedge Fund Investors in Q2 2023: 37
Capri Holdings Limited (NYSE:CPRI) is a high end consumer products company that sells items such as handbags and shoes under luxury brands. Its shares are currently seeing some action on the stock market, as Capri Holdings Limited (NYSE:CPRI) is under an acquisition bid and the shares respond favorably to news of other offers.
By the end of this year’s second quarter, 47 out of the 19 hedge funds part of Insider Monkey’s database had held a stake in Capri Holdings Limited (NYSE:CPRI). Out of these, the largest shareholder is Richard Mashaal’s Rima Senvest Management since it owns a $ 102 million stake.
8. Cleveland-Cliffs Inc. (NYSE:CLF)
Number of Hedge Fund Investors in Q2 2023: 37
Cleveland-Cliffs Inc. (NYSE:CLF) is another steel company. The firm is currently seeking to acquire United States Steel Corporation, and the chances of it becoming one of the largest steel companies in the world grew in September after the two worked out some contractual complications.
For their June quarter of 2023 investments, 37 out of the 910 hedge funds part of Insider Monkey’s database were Cleveland-Cliffs Inc. (NYSE:CLF)’s investors. Ken Fisher’s Fisher Asset Management owns the largest stake among these, which is worth $133 million.
7. New York Community Bancorp, Inc. (NYSE:NYCB)
Number of Hedge Fund Investors in Q2 2023: 40
New York Community Bancorp, Inc. (NYSE:NYCB) is an American regional bank with close to 400 branches in several U.S. states. Looks like there might be some juice to the shares, as the short interest in the stock dropped by nearly 25% at the September close.
After scouring through 910 hedge fund portfolios for their second quarter of 2023 shareholdings, Insider Monkey discovered that 40 had bought the bank’s shares. New York Community Bancorp, Inc. (NYSE:NYCB)’s biggest hedge fund investor is Irving Kahn’s Kahn Brothers due to its $71.4 million stake that comes via 6.3 million shares.
6. Skechers U.S.A., Inc. (NYSE:SKX)
Number of Hedge Fund Investors in Q2 2023: 41
Skechers U.S.A., Inc. (NYSE:SKX) is a popular American shoe company that sells a wide variety of footwear products. Its shares are rated Strong Buy on average, and analysts have penned in a $14 share price upside based on the average share price target of $62.
41 out of the 910 hedge funds part of Insider Monkey’s database had invested in Skechers U.S.A., Inc. (NYSE:SKX) during Q2 2023. Richard S. Pzena’s Pzena Investment Management is the largest shareholder among these since it owns $209 million worth of shares.
Jabil Inc. (NYSE:JBL), Skechers U.S.A., Inc. (NYSE:SKX), Chesapeake Energy Corporation (NASDAQ:CHK), and Tenet Healthcare Corporation (NYSE:THC) are some great mid-cap value stocks that hedge funds are buying now.
Click here to continue reading and check out 5 Best Mid-Cap Value Stocks to Buy Now.
Suggested articles:
- 12 Biggest Dividend Cuts and Suspensions of 2023
- 25 Biggest Publicly Traded Asset Managers
- Wall Street Analysts Just Trimmed Price Targets for These 10 Stocks
Disclosure: None. 13 Best Mid-Cap Value Stocks to Buy Now is originally published on Insider Monkey.
Hedge Fund Resource Center