Markets

Mid Caps Revisited

Shares of five promising growth stocks gain a solid 12%, on average.

By Jeffrey R. Kosnett, Senior Editor

From Kiplinger's Personal Finance magazine, August 2006

In stock picking, a 60% success rate usually means superior returns. So it was with the five midsize growth companies we suggested a year ago ("Dive Into Growth," Aug. 2005). Three of the five flourished, resulting in an average gain of 12%. In contrast, Standard & Poor's MidCap 400-stock index, a measure of midsize U.S.-company stocks, rose just 8%.

Our best picks were Citrix, a software company, which gained 68%, and business consultant Corporate Executive Board, up 40%. Fisher Scientific, a maker of medical-testing and laboratory products, had been up as much as 25% after the company agreed to a buyout by Thermo Electron. But Thermo is paying with stock and its shares have been weak lately, trimming Fisher's gain as of mid June to 13%. Thermo has a fine long-term record, so we'd be happy to own it. We'd certainly stay with Citrix and Corporate Executive Board.

Our downers were Pentair, which makes water-filtration systems, pumps and pool equipment and lost 27%, and poultry producer Sanderson Farms, off 33%. It's taking Pentair longer than expected to make a splash in the water business, but the stock is suitable for patient, conservative investors. Sanderson shares sank after avian-flu fears led to lower demand -- and prices -- for chicken. Sanderson is now a speculative investment.

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