The Top Mid-Cap Stocks To Target On Down Days

A contentious U.S. Presidential election suggests a tug-of-war between bulls and bears in October, putting investors at risk of whipsaw caused by emotionally-driven decision-making. How you navigate this volatility could have big implications for your portfolio.

The biggest risk could come from extrapolating personal opinions to the market’s long-term behavior. Historically, selling stocks because of political bias has been a mistake, because price action often bucks so-called conventional wisdom. For example, the Health Care Select Sect SPDR ETF (XLV) gained 58% between January 1, 2009 and December 31, 2012, despite worry that electing President Obama – and passage of the Affordable Care Act in 2010 – would disrupt the sector.

2009-01-02 2012-12-28 % Change
VanEck Vectors Pharmaceutical ETF (PPH) $21.90 $33.90 54.8%
SPDR Biotech ETF (XBI) $17.49 $27.99 60.1%
Health Care Select Sect SPDR ETF (XLV) $21.98 $34.72 57.9%

Source: Top Stocks for Tomorrow.

Although long-term investors are best served focusing less on who wins the White House and more on stock picking, I expect some people will sell stocks based on pre-election headlines using the argument, “this time is different.” If so, then investors could get an opportunity to buy leading mid-cap stocks in top sectors at a discount, regardless of November’s outcome.

The best mid-cap sectors

Weekly, our sector ranking highlights groups experiencing tailwinds or headwinds and emerging sector trends by aggregating individual scores on over 1,500 stocks.

We explain our system more here, but scores are based on the following factors:

  • Forward earnings growth expectations
  • Historical trends in reporting earnings that beat Wall Street estimates
  • Insider buying
  • Short-term and long-term institutional money flow
  • Forward valuation relative to historical valuation
  • Contra-trend short interest analysis
  • Quarterly seasonality over the past decade

After we rank sectors, we spotlight the highest scoring stocks within the best groups so members can compile their watch lists.

This week, the top-rated mid-cap sectors are consumer goods (Wolverine World Wide (WWW), Simply Good Foods (SMPL), National Beverage (FIZZ), and Tempur Sealy (TPX)), services (Churchill Downs (CHDN), Penske Automotive (PAG), Ollie’s Bargain Outlet (OLLI), ServiceMaster (SERV), and Casey’s General Stores (CASY)), technology (Mimecast Ltd (MIME), Coupa Software (COUP), and LivePerson Inc. (LPSN)), industrials (Trex Company (TREX), SiteOne Landscape Supply (SITE), and John Bean Technologies (JBT)), and basic materials (Enviva Partners (EVA), Scotts Miracle-Gro (SMG), and Cleveland-Cliffs (CLF)).

Financials and healthcare score neutral, and REITs, energy, and utilities rank below average. It’s best to remain industry or stock specific in those groups.(see further below).

Source: Top Stocks for Tomorrow.

BEST & WORST SCORING STOCKS

Our methodology takes guess-work out of stock picking by objectively rating companies based on key drivers of future price. Because prices follow earnings over time, insiders buy for one reason, money flow reflects institutional sentiment, and seasonal patterns can rhyme, our approach offers a consistent stream of high-quality investment ideas.

This week, our system identified over 150 high-scoring and low-scoring large-cap, mid-cap, and small-cap stocks for members, including these 42 mid-cap stocks. I’ve highlighted stocks with the biggest increase in score for convenience.

We also provide the best-scoring mid-cap industries below this table, including the best-scoring stocks within those industries.

MID CAP

10/1/2020

4 WEEK MA

Company Name

Symbol

Sector

INDUSTRY

SCORE

SCORE

BEST

Churchill Downs

(CHDN)

SERVICES

GAMBLING

115

111.25

Simply Good Foods

(SMPL)

CONSUMER GOODS

PACKAGED FOODS

115

111.25

Wolverine World Wide, Inc.

(WWW)

CONSUMER GOODS

FOOTWEAR & ACCESSORIES

115

113.75

Enviva Partners, LP

(EVA)

BASIC MATERIALS

LUMBER & WOOD PRODUCTION

110

106.25

Assurant, Inc.

(AIZ)

FINANCIALS

INSURANCE-SPECIALTY

105

102.50

Coupa Software Incorporated

(COUP)

TECHNOLOGY

SOFTWARE-APPLICATION

105

102.50

National Beverage Corp.

(FIZZ)

CONSUMER GOODS

BEVERAGES

105

98.75

Mimecast Limited

(MIME)

TECHNOLOGY

SOFTWARE-INFRASTRUCTURE

105

98.75

Penske Automotive Group, Inc.

(PAG)

SERVICES

AUTO & TRUCK DEALERSHIPS

105

96.25

Quidel Corporation

(OTC:QDEL)

HEALTHCARE

DIAGNOSTICS & RESEARCH

105

77.50

John Bean Technologies Corporation

(JBT)

INDUSTRIALS

DIVERSIFIED MACHINERY

100

96.25

Medpace Holdings, Inc.

(MEDP)

HEALTHCARE

DIAGNOSTICS & RESEARCH

100

102.50

Ollie’s Bargain Outlet

(OLLI)

SERVICES

DISCOUNT STORES

100

90.00

SiteOne Landscape Supply

(SITE)

INDUSTRIALS

INDUSTRIAL DISTRIBUTION

100

96.25

Tempur Sealy International, Inc.

(TPX)

CONSUMER GOODS

FURNISHINGS, FIXTURES & APPLIANCES

100

91.25

LendingTree, Inc.

(TREE)

FINANCIALS

MORTGAGE FINANCE

100

90.00

Trex Company, Inc.

(TREX)

INDUSTRIALS

BUILDING PRODUCTS & EQUIPMENT

100

96.25

Allogene Therapeutics, Inc.

(ALLO)

HEALTHCARE

BIOTECHNOLOGY

95

73.75

Casey’s General Stores, Inc.

(CASY)

SERVICES

GROCERY STORES

95

92.50

Deckers Outdoor Corporation

(DECK)

CONSUMER GOODS

FOOTWEAR & ACCESSORIES

95

92.50

LivePerson, Inc.

(LPSN)

TECHNOLOGY

SOFTWARE-APPLICATION

95

92.50

Nelnet, Inc.

(NNI)

FINANCIALS

CREDIT SERVICES

95

83.75

ServiceMaster Global

(SERV)

SERVICES

PERSONAL SERVICES

95

92.50

The Scotts Miracle-Gro Company

(SMG)

BASIC MATERIALS

AGRICULTURAL INPUTS

95

91.25

Axon Enterprise

(AAXN)

INDUSTRIALS

AEROSPACE & DEFENSE

90

72.50

AutoNation, Inc.

(AN)

SERVICES

AUTO DEALERSHIPS

90

85.00

Cleveland-Cliffs Inc.

(CLF)

BASIC MATERIALS

STEEL

90

87.50

Dick’s Sporting Goods, Inc.

(DKS)

SERVICES

SPECIALTY RETAIL

90

91.25

Ellington Financial Inc.

(EFC)

FINANCIALS

MORTGAGE FINANCE

90

87.50

The Hain Celestial Group, Inc.

(HAIN)

CONSUMER GOODS

PACKAGED FOODS

90

92.50

Inovalon Holdings

(INOV)

HEALTHCARE

HEALTH INFORMATION SERVICES

90

87.50

Select Medical Holdings Corporation

(SEM)

HEALTHCARE

HOSPITALS

90

82.50

Stifel Financial Corp.

(SF)

FINANCIALS

CAPITAL MARKETS

90

87.50

WORST

Avista Corporation

(AVA)

UTILITIES

DIVERSIFIED UTILITIES

20

23.75

Clovis Oncology, Inc.

(CLVS)

HEALTHCARE

BIOTECHNOLOGY

20

30.00

Escalon Medical Corp.

(OTC:ESMC)

HEALTHCARE

MEDICAL DEVICES

20

17.50

Golar LNG Partners LP

(GMLP)

ENERGY

OIL & GAS MIDSTREAM

20

21.25

NGL Energy Partners LP

(NGL)

ENERGY

OIL & GAS REFINING & MARKETING

20

16.25

Plains All American Pipeline, L.P.

(PAA)

ENERGY

OIL & GAS MIDSTREAM

20

20.00

Viper Energy Partners LP

(VNOM)

ENERGY

OIL & GAS MIDSTREAM

20

20.00

The best and worst scoring mid-cap industries

Similar to our sector ranking, our industry ranking is compiled by aggregating individual stock scores by basket. Once we’ve aggregated scores, we rank industries from best to worst by sector, and then, we highlight the best-scoring individual stocks in the top industries (again, in parenthesis).

For example, the best mid-cap industries are specialty retail (Dick’s Sporting Goods (DKS) and Williams-Sonoma (WSM)), steel (Cleveland-Cliffs), packaged foods (Simply Good Foods and Hain Celestial (HAIN)), footwear (Wolverine World Wide and Decker’s Outdoor (DECK)), and restaurants (Wingstop Inc. (WING)).

Drilling down even deeper, here are the best industries within each sector and the highest-scoring stocks within those industries (in parenthesis):

  • The best basics basket is steel.
  • Concentrate on packaged foods, footwear, and auto parts (Dorman Products (DORM)) in consumer goods.
  • No energy groups score above average.
  • Focus on asset management (AllianceBernstein (AB)) in financials.
  • No healthcare groups rank above average. Building products (Trex Company and Simpson Manufacturing (SSD)), industrial distribution (SiteOne Landscaping Supply), and staffing (ASGN Inc.(ASGN)) offer upside in industrial goods.
  • No REITs score above average.
  • The strongest scoring services industries include specialty retail, restaurants, and apparel retail (Carters Inc. (CRI) and American Eagle Outfitters (AEO)).
  • Application software (Coupa Software and LivePerson), semi equipment (Cree Inc. (CREE)), and information technology (CoreLogic Inc. (CLGX) Clarivate Plc (CCC) and Synnex Corp. (SNX)) are top-rated in technology.

Those industries score highest, but if you’re interested in where another particular industry ranks within a sector, you can find that information in this next table, which ranks the best to worst industries by sector. This can be valuable, especially if your portfolio is concentrated within one sector.

Never miss a money-making idea. Get all the ideas we sent to members this week, plus weekly large cap, mid cap, small cap and ADR rankings. Know what sectors, industries, and stocks to buy and when to buy them. Over 400 bps of excess return in the following 52 weeks since 2017. Free trial, special introductory pricing, and you can cancel anytime. Join the conversation. Sign up for Top Stocks For Tomorrow.

Disclosure: I am/we are long COUP, ALLO, WING. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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