Natixis har analyseret afkastet for de små, mellemstore og de store selskaber og konkluderer, at de mellemstore ofte er et godt alternativ for investorerne. De bliver tit overset, fordi der er større interesse for de små og de helt store. De mellemstore er ikke helt så svingende i resultaterne som de små, og de er mere tilpasningsegnede end de store. Derfor er de mindre volatile – der er færre udsving i aktierne i Russell Midcap-indekset end i Russell 2000-indekset for de små selskaber.
Mid-Cap Stocks: A Sweet Spot for Investors?
Mid-cap investing historically has offered a great opportunity for investors, with the potential to combine the staying power of large-cap stocks and the growth potential of small-cap stocks. This becomes clear when looking at the long-term returns of mid-sized companies, dating back over 40 years. Since 1979 – through the end of 2019 – the Russell Midcap® Index1 has had stronger returns than the small-cap Russell 2000® Index2 and the large-cap Russell 1000® Index.3
Room for Growth
Mid-cap companies tend to have faster growth rates than large-cap stocks, including faster earnings and sales growth. This may be a result of there being more remaining business opportunities in the mid-cap space. For example, many large-cap companies have already expanded internationally, and have reached out to most of their potential buyers. By contrast, mid-sized companies may have more of these opportunities ahead of them.
Flexibility and Hidden Potential
Because of their size, mid-cap companies may be nimble than large-caps when required to pivot or adapt their business models. This agility has the potential to help them more quickly adjust their business approach to take advantage of new or changed market opportunities. It’s generally accepted that mid-cap companies are less covered by stock analysts than large-caps. Thus, the most-skilled active portfolio managers and their analysts may be able to uncover opportunities while most analysts focus on the largest companies in the world.
Goldilocks Factors
Generally speaking, mid-sized companies are usually more established companies than smaller companies, which can mean they present lower volatility risk to investors. This is clear when looking at the standard deviation over time of the Russell Midcap® Index and the Russell 2000® Index.
Annualized Risk – Standard Dev (%)*
1 yr | 3 yr | 5 yr | 10 yr | |
Russell Midcap Index | 27.9 | 20.4 | 17.1 | 15.2 |
Russell 2000 Index | 29.5 | 22.6 | 19.9 | 19.9 |
As of 09/30/2020. Past performance is no guarantee of future results. Index returns are not intended to imply any future performance of any investment product. An investor cannot invest directly in an index.
* Standard deviation is a statistical measure that sheds light on historical volatility.
Similarly, mid-cap companies tend to have lower failure rates than small-cap companies. Many small-cap companies have narrow business lines, concentrated buyers, and a single region of focus. This scenario can invite a higher probability of a single event resulting in significant business challenges.
From the perspective of access to capital for growth and security, mid-cap companies many also have an advantage. Small companies can face significant challenges when trying to get access to capital, whether it be equity or debt financing. Securing financing is a costly and complicated process, and one that arguably favors larger companies. We have seen the challenges that small companies can have acquiring working capital – particularly in markets that are not completely risk-on with credit widely available.
Mid-Cap Stocks and the Business Life Cycle
The natural business cycle for successful companies – start-up, growth, maturity – may further bolster the appeal of mid-cap stocks for investors. Smaller companies in the start-up or growth phase can present growth opportunities, but meaningful risk.
By contrast, mid-sized companies in the growth phase of their development often have products or services that have proven successful over time, established distribution channels, and room to prosper. Moreover, more mature large companies may have fewer opportunities for organic growth and often begin seeking acquisitions as they work to maintain their legacy success.
Pulling It All Together
For investors, mid-cap stocks can represent an attractive blend of some of the best of large-cap and small-cap characteristics. Historical data shows that mid-caps have often had the best return per unit of risk4 when compared to large and small-cap companies. Nevertheless, over the short term, different capitalization groups usually rotate in and out of favor – such as in the late 2010s, when large-cap stocks were demonstrating outstanding performance and exhibiting more limited risk.