You can go small or you can go big, but ahead of market ambiguities, investors may be best served with mid-cap stocks. Sure, the sector might sound a bit boring. After all, the small-capitalization ideas offer blistering return potential. And the blue chips deliver maximum (relative) safety. The midcaps? We’re talking about a compromised arena.
Given the dramatic performance of the equities space in 2023 – especially for the red-hot technology sector – compromise might not sound like the most exciting proposal. Still, we can’t be too greedy. After all, we sidestepped the recession bullet, a bullet many economists feared would hit us center mass last year. But you never know. Wall Street’s grim reaper could be reloading.
I don’t want to come off as a fearmonger but let’s be real. We don’t know what’s going to happen next. With that, below are mid-cap stock picks to consider.
An automotive retailer, AutoNation (NYSE:AN) provides new and pre-owned vehicles and associated services in the U.S. At first glance, it might not seem the most viable idea for mid-cap stocks to buy in 2024. For one thing, shares have already gained 40% last year. Therefore, if economic conditions go sour in the new year, fresh AN stakeholders could be left holding the bag.
Still, the robust upswing is also encouraging in the sense that even with borrowing costs so high, people opened their wallets for vehicular purchases. Part of that stems from mechanical realities. With the average age of passenger vehicles on U.S. roadways hitting a record 12.5 years in 2023, people were effectively delaying their replacement cycles. Well, cars – no matter how reliable – can only last for so long.
Moving ahead, it’s possible that the Federal Reserve could lower interest rates. If so, that would make acquiring high-ticket items relatively more accessible. Thus, AN could be an intriguing idea for mid-cap stock picks for adventurous investors.
Viper Energy (VNOM)
Based in Midland, Texas, Viper Energy (NASDAQ:VNOM) is a publicly traded limited partnership that seeks to own and acquire mineral and royalty interest in oil and natural gas properties, primarily located in the Permian Basin. Per its website, VNOM has been treated as a corporation for U.S. federal income tax purposes since May 2018.
At a cursory glance, VNOM might raise eyebrows as one of the mid-cap stocks to buy in 2024. Last year, VNOM gained a bit over 8%, a truly modest performance. After all, buying a basket of securities that make up the S&P 500 would have brought you a return of nearly 25%. Still, what I appreciate about Viper is the underlying hydrocarbon assets, which feature high energy density.
Put another way, Viper stands to be relevant for quite some time. Also, investors will likely note that VNOM trades at a price/earnings-to-growth (PEG) ratio of 0.39X, lower than 74.3% of the competition. As such, it’s one of the mid-cap stock picks to consider.
Nomad Foods (NOMD)
An American-British nutrition specialist, Nomad Foods (NYSE:NOMD) focuses on frozen-food products. It might not be the sexiest business among mid-cap stocks to buy. However, should economic pressures end up hurting consumers in the new year, Nomad could cynically benefit from the trade-down effect. That is, people will stop eating out at restaurants and buy their calories at the local grocery store.
Further, Nomad just needs to grab an appropriately sized bite out of the core sector. According to MarketsandMarkets, the global frozen foods market reached a valuation of $284.2 billion in 2023. Further, experts project that by 2028, the sector will expand at a compound annual growth rate (CAGR) of 5.1%. At the forecast culmination point, the ecosystem could be worth $363.7 billion.
Look at Nomad’s current market capitalization: only $2.96 billion at the end of last year. Further, NOMD trades at only 13.34X trailing-year earnings, below the sector median 18.65X. Combined with a unanimous analyst view of strong buy, NOMD is one of the mid-cap stock picks to put on your radar.
International Seaways (INSW)
A shipping company, International Seaways (NYSE:INSW) operates a fleet of crude oil and refined product tankers worldwide. Despite significant challenges in both the energy and shipping industries, INSW performed quite well in 2023, gaining over 30% of equity value. Encouragingly, nearer-term performance has accelerated. In the past six months, INSW returned stakeholders nearly 19%.
Cynically, International Seaways could continue to deliver the goods. At a basic level, the world runs on oil, in large part due to the aforementioned high energy density. Sure, electric vehicles may eventually dominate the roadways. However, the same might not be said about the airways and sea lanes, again because of the scientific realities undergirding hydrocarbons.
In addition, geopolitical flashpoints – which probably won’t ease up in the new year – should support hydrocarbon prices. Therefore, INSW’s discounted forward earnings multiple of 4.73X appears credible. Demand should increase for what is practically a permanently relevant industry. Also, analysts peg shares a unanimous strong buy with a $59.67 price target, projecting over 31% upside.
Matador Resources (MTDR)
Headquartered in Dallas, Texas, Matador Resources (NYSE:MTDR) specializes in oil and gas exploration. In other words, it’s part of the upstream component of the energy value chain. Further, its projects primarily center in Texas and New Mexico. As with other direct players in the hydrocarbon energy market, MTDR failed to deliver an impressive print in 2023, gaining just under 7%. Still, for speculators, MTDR could be one of the mid-cap stocks to buy.
First, if the Fed lowers rates, this action would imply a devaluation of the dollar. That’s cynically positive for commodities, including critical energy resources. Therefore, I would expect MTDR to rise. Second, I don’t anticipate – as stated before – geopolitical tensions to ease. And that will likely undergird oil-producing nations’ coordinated efforts to bolster energy prices.
Further, there’s not a whole lot we can about these efforts because we have existing tensions with some of the oil-producing nations. About the only solution is to focus on domestic exploration projects. Notably, MTDR is a unanimous strong buy among 10 expert voices. It’s one of the mid-cap stock picks to watch for sure.
Alliance Resource Partners (ARLP)
Hailing from Tulsa, Oklahoma, Alliance Resource Partners (NASDAQ:ARLP) might not be everyone’s cup of tea for mid-cap stocks. As a coal-mining company, Alliance Resource supplies thermal coal to electric utilities and metallurgical coal to steelmakers. At first glance, the business sound anachronistic. Also, if it weren’t for a late surge, ARLP might be done for 2023. However, it managed to eke out a less-than-8% return.
While it might not seem a sterling example of mid-cap stock picks, ARLP deserves a close examination for long-term investors. First, the facts. According to the U.S. Geopolitical Survey, energy operators primarily use coal as fuel to generate electric power in this country. Yes, coal certainly carries a yesteryear image and reputation. But those in the know recognize its vital importance.
To be fair, coal isn’t a growth market, with the sector projected to be flat in 2024. However, coal might also see cynically benefit from regional energy shortages. If so, ARLP could end up being a contrarian market idea. Benchmark analysts rate shares a buy with a $28 price target, implying 32% growth.
SSR Mining (SSRM)
A gold and silver mining company, SSR Mining (NASDAQ:SSRM) also specializes in copper, lead, and zinc. It primarily operates in North and South America. Before we dive into the speculative potential for SSRM, I should note that it’s a highly risky idea for mid-cap stocks. Indeed, with a market value of $2.19 billion, it’s on the smaller side of the spectrum. Also, it lost nearly 34% of its equity value in 2023.
So, let’s be blunt: other alternatives for gold-mining stocks exist. But if you want to maximize your reward potential in the hopes that a beleaguered entity like SSRM could turn things around in 2024, then this could be your ticket. As stated earlier, if the Fed lowers borrowing costs, then the relative devaluation of the dollar should boost commodities. That’s a natural boon for precious metals.
Further, with demand for electric-powered vehicles rising, elements such as copper should also experience lifted interest. Thus, if you can stomach the volatility, SSRM could be interesting. Analysts think so, rating shares a moderate buy with a $16.42 target, projecting nearly 53% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.