How will mid cap stocks do in 2024?
Going ahead, experts believe that the rally in midcaps and smallcaps in 2024 is not likely to be as strong as the one in 2023 due to high valuations. Furthermore, the analysts have started to prefer largecaps over midcaps and smallcaps in 2024 after last year's surge.
Mid-caps are expected to post 8% y/y growth in 2023 and 2024, while small caps are anticipated to rebound from profit declines of 10% in 2023 to 23% growth in 2024.
Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Advanced Micro Devices, Inc. (NASDAQ:AMD) are some of the stocks that will make you rich in 2024, besides Palantir Technologies Inc. (NYSE:PLTR).
According to mutual fund advisors, even though the small cap segment has run up a lot in the last six months, investors can still invest in these schemes in a staggered manner to create wealth over a long period. Small cap schemes invest in very small companies or their stocks.
Advocates say these companies offer financial stability, growth potential and industry diversification, and could outperform in 2024. Midcap stocks are like the middle children of the investing world, sometimes ignored by investors who focus on their large-cap and small-cap siblings.
If, on the other hand, the economy begins to slow down or enter a recession, then mid-cap companies will outperform small-caps. As seen in the figure below, mid and small-caps (represented by the S&P 600) perform well in the early stages of the business cycle as soon as people sense a recovery.
Mid-cap stocks could offer diversification, strong fundamentals in 2024. Portfolio Manager Brian Demain says the outlook for mid-cap stocks looks favorable amid a slowing rate-hike cycle, secular growth themes, and underperformance relative to large caps.
- Aris Water Solutions, Inc. (NYSE:ARIS)
- XPeng Inc. (NYSE:XPEV)
- NIO Inc. (NYSE:NIO)
- ANI Pharmaceuticals, Inc. (NASDAQ:ANIP)
- Concentrix Corporation (NASDAQ:CNXC)
- Fiverr International Ltd. (NYSE:FVRR)
- Perion Network Ltd. (NASDAQ:PERI)
- StoneCo Ltd. (NASDAQ:STNE)
Earnings Rebound
Despite an uncertain economic outlook, the S&P 500 has rallied to new all-time highs in 2024 driven by remarkably strong underlying economic fundamentals. S&P 500 companies have reported their second consecutive quarter of year-over-year earnings growth in the fourth quarter.
Analysts project 11.5% earnings growth and 5.5% revenue growth for S&P 500 companies in 2024. Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year.
What are the best stocks to invest in 2024?
- Broadcom Inc. (NASDAQ:AVGO)
- Eli Lilly and Company (NYSE:LLY)
- JPMorgan Chase & Co. (NYSE:JPM)
- Berkshire Hathaway Inc. (NYSE:BRK-B)
- Apple Inc. (NASDAQ:AAPL)
- Visa Inc. (NYSE:V)
- Alphabet Inc. (NASDAQ:GOOG)
Mid caps may offer more growth potential than large caps, and possibly less risk than small caps. Small-cap stocks tend to be, on average, least developed publicly traded companies, although there are exceptions.
Both the midcap and smallcap segments are overvalued at the moment, which calls for a cautious approach from investors, according to Anirudh Garg, who is the founder, partner and fund manager at Invasset PMS.
To find an appropriate investment mix for your time horizon, find your age and the corresponding portfolio allocation. A typical mixture could include 60% large-cap (established companies), 20% mid-cap/small-cap (small to medium-sized compa- nies), and 20% international (companies outside the U.S.) stocks.
Because mid-caps tend to have stronger balance sheets than small caps, this reduces risk while providing superior returns to large caps.
| Company Name | LTP | % Change |
|---|---|---|
| BBTC Bombay Burmah Trading Corporation Ltd | 1574.8 | -0.1 |
| RELINFRA Reliance Infrastructure Ltd | 277.35 | 2.3 |
| BORORENEW Borosil Renewables Ltd | 523.6 | 4.0 |
| CESC CESC Ltd | 119.7 | -0.7 |
Volatility: Mid-cap stocks can be more volatile than large-cap stocks, with their prices subject to significant fluctuations. Liquidity: In some cases, mid-cap stocks may have lower trading volumes, making it more challenging to buy or sell shares, particularly in large quantities.
During a recession, investing in cash and cash equivalents becomes a strategic choice for investors who are hoping to preserve their capital and maintain liquidity. Cash equivalents include short-term, highly liquid assets with minimal risk, such as Treasury bills, money market funds and certificates of deposit.
The pressure in the mid-cap and small-cap indices comes after market regulator Securities and Exchange Board of India (SEBI) raised concerns over froth building up in the segment.
Long-term investment horizon: Aim for at least 5-7 years, ideally 10+ years, to allow mid-cap companies time to grow and potentially deliver higher returns. Short-term goals are not suited for these funds due to their volatility.
Why buy mid-cap funds?
Mid-cap stocks tend to offer investors greater growth potential than large cap stocks, but with less volatility and risk than small cap stocks. Mid-cap funds allow investors to easily and cost-effectively hold a diversified portfolio of these types of stocks.
There are several indexes for tracking mid-cap stocks. The most widely referenced is the S&P Mid-Cap 400, but others include the Russell Midcap and Wilshire US Mid-Cap Index.
| S.No. | Name | CMP Rs. |
|---|---|---|
| 1. | Rama Steel Tubes | 13.25 |
| 2. | Brightcom Group | 14.90 |
| 3. | Easy Trip Plann. | 43.75 |
| 4. | Radhika Jeweltec | 65.30 |
| S.No. | Name | CMP Rs. |
|---|---|---|
| 1. | Guj. Themis Bio. | 376.05 |
| 2. | Refex Industries | 145.75 |
| 3. | Tanla Platforms | 850.10 |
| 4. | M K Exim India | 75.72 |
| Stock | Forward price-to-earnings ratio (P/E) |
|---|---|
| Enphase Energy Inc. (ENPH) | 25.3 |
| Microsoft Corp. (MSFT) | 30.0 |
| Nvidia Corp. (NVDA) | 26.6 |
| Tesla Inc. (TSLA) | 57.6 |
