Oct 1, 2012

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Medium Cap Does Not Mean Mediocre

What Are Medium Cap Stocks?

medium capMedium cap stocks inhabit an uncertain ground between large cap and small cap stocks. There are no exact criteria that are accepted with a broad consensus for determining whether a stock is medium cap. Most knowledgeable investors will organize their definitions of stocks in the following fashion:

• Small cap stocks are those issued by companies that have less than $1 billion dollars in market capitalization. This number refers to the total value of all the combined stock issued by the company. However, this is not the real floor. Companies with only a few hundred million dollars in market capitalization may be classified as micro cap or even penny stocks.
Medium cap stocks come from companies with anywhere between $1 billion and $5 billion in total market capitalization.
• After $5 billion, investors begin to classify a company as large cap. However, the largest of these have more than $250 billion and are called mega cap companies.

These are not official numbers. There is no real significance to the appellations. You can trade any of these companies with the same ease as any other. These are just useful ways to speak about companies in regard to their size. There is a relation between the price of each stock share and the total market capitalization but it is not a direct relationship because some companies may issue more shares than others.

Popular Medium Cap Stocks for 2012

The term medium should not confuse anyone into thinking that these stocks are mediocre. There is just as much dynamism in these stocks as you see elsewhere. Some examples of medium-cap companies that have nearly doubled their market cap during the year 2012 are listed below. Each of them is characterized by the possession of solid fundamentals and returns larger than 30% for the last year.

• Weight Watchers International — As the general population becomes more and more concerned about the obesity crisis, this company and other like it are generating incredible profits.
• Teradata — This company is a leader in the technology revolution. They produce hardware and software to support warehousing services.
• Verifone Systems — Profiting from the rush into point-of-sale technology that is happening even at the level of single proprietor small businesses, Verifone’s shares are up 45% this year. Most experts agree that the shares will continue to gain in the next year.
• Fossil — A surprising member of the list, this company makes wristwatches as well as sunglasses and jewelry. It just goes to prove that there are more ways to make money than simply jumping on the tech and energy bandwagons.
• Regeneron — This is the big winner when you look at all the medium cap companies. Regeneron develops and sells medicines that fight inflammation and cancer. The three-year average return for this stock is an amazing 102%.

These stocks should not be overlooked because of their name. You can generate fabulous returns with these companies while still sensing some comfort and confidence in their relative size. Medium cap stocks do not have to be boring parts of your portfolio.

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