Mid-caps sit between small and large caps (roughly ~$2–$10B market value) and are tracked most cleanly by the S&P MidCap 400 and the Russell Midcap family. They’re big enough to have product/market fit and financing options, but still small enough for operating leverage, mix shifts, and M&A to move the needle.
In 2025 they’ve lagged the AI-turbocharged mega-caps: the iShares Core S&P Mid-Cap ETF (IJH), a pure S&P 400 tracker, shows a ~4.5% NAV total return year-to-date through Oct 13, versus ~13.5% for the S&P 500 and ~12.4% for the small-cap-heavy Russell 2000. That underperformance is the opportunity.
Valuation supports the setup: State Street’s MDY (another S&P 400 tracker) shows the cohort at ~18x next-twelve-month earnings and ~11x price/cash-flow as of Oct 13, implying a noticeable discount to many large-cap peers after the 2023–25 multiple expansion at the top end. Sector mix is also distinct: Industrials are the single largest sleeve, with Financials and Information Technology following, so the “AI winners only” bias that dominates large-cap indices is less extreme here.
Cyclically, the backdrop is improving but uneven. Russell’s latest U.S. spotlight flags a rising two-year EPS growth outlook across size cohorts and a broadening of industry leadership beneath the mega-caps, consistent with the idea that earnings breadth is turning up. Meanwhile, dealmaking has restarted: global M&A volumes were down 9% y/y in 1H25, but values rose 15%, a mix that historically favors mid-caps (targets and consolidators) as financing normalizes and boards regain confidence.
Structurally, mid-caps aren’t just a “tweener” bucket. S&P’s long-run research has repeatedly shown this segment to be a performance “sweet spot,” with better risk-adjusted returns than both large and small caps over long windows; more recent sell-side and sponsor work echoes the same message and quantifies the edge across rolling 10-year periods. Translation: when the cycle broadens and rates stabilize, mid-caps tend to catch up — fast.
The payoff is asymmetric: you’re not paying mega-cap premiums, yet you still get real operating leverage, cleaner capital allocation, and genuine M&A optionality. If breadth keeps improving into 2026, this is where the market’s next leg of “catch-up alpha” is most likely to come from.
A stock market chart. Photo by Arturo A on Pexels
Our Methodology
For our list of the oversold mid-cap stocks to buy according to hedge funds, we screened for stocks in the mid-cap range that had an RSI lower than 30. From these, we selected stocks that had the highest number of hedge funds having a stake in them as of Q2, 2025, and ranked them in order of the hedge fund sentiment as well. We sourced the RSI data from stockanalysis.com and the hedge fund sentiment from the Insider Monkey database. The market cap data is as of October 14.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
9. Magnite, Inc. (NASDAQ:MGNI)
RSI: 28.32
Market Cap: $2.56 Billion
Number of Hedge Fund Holders: 34
Magnite, Inc. (NASDAQ:MGNI) is one of the most oversold mid-cap stocks to buy according to hedge funds.
On October 8, 2025, Magnite announced that members of the Digital News Publishers Association (DNPA) — a coalition of 22 major Indian news outlets — have adopted its audience activation platform, Magnite Access. This move gives DNPA members greater control over their first-party data while offering advertisers more direct access to high-quality inventory from premium publishers. The rollout comes amid rising demand for transparent, privacy-conscious ad solutions, particularly in India’s booming digital media market.
The announcement follows a string of recent developments at Magnite, including integrations with Acxiom for enhanced data targeting, a major CTV “Pause Ads” launch, and a programmatic partnership with Paramount+ in Australia.
Magnite, Inc. (NASDAQ:MGNI) operates one of the world’s largest independent sell-side advertising platforms. Its tools help publishers monetize content across CTV, online video, display, and mobile environments while giving advertisers more transparency and control.
8. Oddity Tech Ltd. (NASDAQ:ODD)
RSI: 25.25
Market Cap: $2.92 Billion
Number of Hedge Fund Holders: 36
Oddity Tech Ltd. (NASDAQ:ODD) is one of the most oversold mid-cap stocks to buy according to hedge funds.
On October 8, 2025, KeyBanc Capital Markets analyst Scott Schoenhaus maintained an Overweight rating on Oddity Tech but lowered the price target from $90 to $80.
The firm emphasized that Oddity remains in the early innings of a high-growth story, with potential upside driven by its proprietary hyperspectral + biotech stack and the upcoming Q4 launch of a medical-grade skin and body care brand. Despite the target cut, KeyBanc remains bullish on the company’s ability to scale both top-line and margin expansion, noting that revenue growth above 20% and long-term EBITDA margins above 20% remain achievable.
The adjustment appears to hinge on broader multiple compression across mid-cap growth names rather than a deterioration in fundamentals. KeyBanc also highlighted that Oddity’s vertically integrated DTC model, combined with its aggressive R&D investments, positions it uniquely in the beauty-tech space.
Oddity Tech Ltd. (NASDAQ:ODD) is an AI-driven beauty and wellness platform behind brands like IL MAKIAGE and SpoiledChild. The company integrates machine learning, proprietary data, and biotech R&D to personalize consumer products in the skincare, cosmetics, and wellness space. Oddity went public in 2023 and has quickly become one of the most closely watched players in the digital beauty market.
7. AppFolio, Inc. (NASDAQ:APPF)
RSI: 24.25
Market Cap: $8.16 Billion
Number of Hedge Fund Holders: 36
AppFolio Inc. (NASDAQ:APPF) is one of the most oversold mid-cap stocks to buy according to hedge funds.
On October 14, 2025, AppFolio introduced a major strategic shift in its platform with the launch of Real Estate Performance Management, an AI-native architecture designed to move property management from manual, task-based workflows to a performance-oriented model. The system is built on three integrated layers – record, action, and growth – aiming to help property managers optimize outcomes across leasing, maintenance, and resident engagement.
As part of the rollout, AppFolio unveiled new AI-powered modules under what it calls Realm-X Performers. These include tools to automate leasing from lead to signed contract, manage maintenance requests while prioritizing resident satisfaction, and handle communications tied to leases, payments, and renewals. The company also introduced a new guided move-in experience called Resident Onboarding Lift, developed in partnership with Second Nature, which it claims will streamline transitions and improve retention.
AppFolio Inc. (NASDAQ:APPF) is a California-based SaaS company that builds cloud software for the real estate industry. Its platform helps property managers run leasing, accounting, communication, and maintenance workflows in one unified system. With a growing focus on AI integration and mobile-first design, AppFolio continues to expand its role in modernizing real estate operations.
6. Graphic Packaging Holding Company (NYSE:GPK)
RSI: 21
Market Cap: $5.19 Billion
Number of Hedge Fund Holders: 37
Graphic Packaging Holding Company (NYSE:GPK) is one of the oversold mid-cap stocks to buy according to hedge funds.
On October 10, 2025, the company announced that longtime Chief Financial Officer Stephen Scherger will resign from his role effective November 7. Scherger, who has served as CFO since 2015, is set to join packaging rival Amcor as Executive Vice President and Chief Financial Officer starting November 10.
Concurrently, the company named Charles D. Lischer, its Senior Vice President and Chief Accounting Officer, as Interim CFO, effective November 7. Lischer has served as the company’s Chief Accounting Officer since November 2019 and previously held senior finance roles at Teradata and Coca-Cola.
Graphic Packaging Holding Company (NYSE:GPK) is a leading provider of paper-based packaging solutions, serving clients in food, beverage, and consumer product sectors. Headquartered in Atlanta, Georgia, the company operates globally with a focus on sustainability, innovation, and vertically integrated manufacturing.
5. Abercrombie & Fitch Co. (NYSE:ANF)
RSI: 25.37
Market Cap: $3.41 Billion
Number of Hedge Fund Holders: 39
Abercrombie & Fitch Co. (NYSE:ANF) is one of the most oversold mid-cap stocks to buy according to hedge funds. On October 7, 2025, the company announced it will open a new distribution center in Columbus, Ohio, in partnership with Bleckmann, a European supply chain specialist. The facility is expected to be operational by summer 2026 and will serve as a key fulfillment hub for North American operations.
According to the company, the move is aimed at boosting shipping speed, reducing logistics costs, and supporting both store and digital order fulfillment. The new site builds on an existing partnership between the two companies in the UK and the Netherlands, and marks Bleckmann’s formal entry into the U.S. market. Abercrombie has framed the expansion as part of its long-term supply chain modernization strategy, allowing it to scale with demand and tighten delivery times across channels.
The new Ohio center will add automated inventory handling and order processing capabilities, signaling a shift toward greater operational efficiency. If executed well, the investment could improve margins and responsiveness across the company’s U.S. retail and e-commerce footprint.
Founded in 1892 and headquartered in New Albany, Ohio, Abercrombie & Fitch Co. (NYSE:ANF) owns brands including Abercrombie, Hollister, abercrombie kids, and Gilly Hicks, with hundreds of stores worldwide and a growing omnichannel presence.
4. Churchill Downs Incorporated (NASDAQ:CHDN)
RSI: 27.73
Market Cap: $6.20 Billion
Number of Hedge Fund Holders: 43
Churchill Downs Incorporated (NASDAQ:CHDN) is one of the oversold mid-cap stocks to buy according to hedge funds. On October 14, the company announced the addition of three new international races to the Road to the Kentucky Derby points system: the UAE 2000 Guineas, the Saudi Derby, and a newly created Dubai Road to the Kentucky Derby Stakes. These races will form part of the European and Middle East Road, offering horses a chance to qualify for the 2026 Kentucky Derby through designated point allocations.
The move is designed to deepen Churchill Downs’ international pipeline and attract top-tier talent from regions with growing racing influence. By tapping into the Middle East’s expanding horse racing circuits, the company aims to broaden its global footprint and enhance the Derby’s stature as a worldwide event. Only two horses from this expanded pathway will ultimately earn a Derby invitation, but the strategic goal is clear: reinforce the Kentucky Derby’s brand in emerging markets.
Founded in 1875 and based in Louisville, Kentucky, Churchill Downs Incorporated (NASDAQ:CHDN) owns and operates racetracks and gaming facilities across the U.S., including its flagship Churchill Downs Racetrack. It also runs TwinSpires, a major online wagering platform, and has expanded its historical racing machine footprint in multiple states.
3. Paylocity Holding Corporation (NASDAQ:PCTY)
RSI: 29.76
Market Cap: $8.34 Billion
Number of Hedge Fund Holders: 44
Paylocity Holding Corporation (NASDAQ:PCTY) is one of the oversold mid-cap stocks to buy according to hedge funds.
In a move that mixes sports flair with enterprise software, Paylocity (NASDAQ: PCTY) announced on October 9, 2025 that it has become the Official Human Capital Management (HCM) Partner of the NHL’s Vegas Golden Knights. Under the agreement, the Knights will adopt Paylocity’s HR technology to streamline operations, cut down on manual tasks, and shift focus toward culture, talent development, and employee experience.
The partnership also gives Paylocity exposure across the Golden Knights’ brand platforms, reinforcing its identity in high‑visibility, performance‑oriented contexts. No financial terms were disclosed, leaving the revenue impact speculative, but this deal mirrors a broader trend of tech firms using sports sponsorships as both branding and client acquisition levers.
Paylocity Holding Corporation (NASDAQ:PCTY) is a provider of cloud‑based HR, payroll, finance and IT solutions, focused on automating human capital workflows for SMBs and mid‑sized enterprises.
2. The Geo Group, Inc. (NYSE:GEO)
RSI: 27.96
Market Cap: $2.47 Billion
Number of Hedge Fund Holders: 49
The Geo Group is one of the oversold mid-cap stocks to buy according to hedge funds. On October 2, 2025, The Geo Group (NYSE:GEO) announced it had entered into a joint venture with another contractor to manage the 1,310-bed North Florida Detention Facility in Baker County. According to the company’s 8-K filing, the facility will operate under contract with the state of Florida, with GEO designated as the lead manager. This marks a notable expansion of GEO’s presence in the region and adds to its already substantial managed capacity in the southeastern U.S.
The announcement comes ahead of GEO’s third-quarter earnings report, which is scheduled for release on November 6, 2025. While the company has not publicly detailed when operations will commence, the new contract could emerge as a key talking point in the upcoming earnings call, especially as GEO works to reinforce long-term stability in a sector facing regulatory and political headwinds.
The Geo Group (NYSE:GEO) is a Florida-based correctional services company that manages prisons, detention centers, and reentry programs across the U.S. and internationally. Though formerly structured as a REIT, GEO converted to a traditional C-corporation in 2022 and continues to contract with federal, state, and local agencies to operate secure facilities.
1. CarMax, Inc. (NYSE:KMX)
RSI: 26.93
Market Cap: $6.46 Billion
Number of Hedge Fund Holders: 54
CarMax, Inc. (NYSE:KMX) is one of the oversold mid-cap stocks to buy according to hedge funds. On October 1, 2025, Morgan Stanley lowered its price target on CarMax from $80 to $56 while maintaining an Overweight rating.
The firm flagged execution risks tied to CarMax’s omni-channel strategy, noting that its ability to deliver on its digital and physical integration remains uncertain amid intensifying competition. Carvana, in particular, was singled out as having a “competitive moat,” casting a shadow over CarMax’s long-standing market dominance.
Despite the downgrade, Morgan Stanley didn’t issue a bearish call outright: it acknowledged that CarMax still has fundamental strengths, but the path to unlocking them may be more uneven than previously thought.
The stock has been volatile in recent weeks, reflecting investor unease over the used-car market’s normalization and questions around CarMax’s ability to scale its hybrid model without further margin erosion. Analysts are still watching the name closely, suggesting that valuation support could remain if execution improves.
Headquartered in Richmond, Virginia, and founded in 1993, CarMax, Inc. (NYSE:KMX) is the largest used-vehicle retailer in the U.S., operating over 240 stores and offering a growing online platform that supports its no-haggle, customer-centric sales model.
While we acknowledge the potential of KMX to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than KMX and that has 100x upside potential, check out our report about this cheapest AI stock.
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