15 Mighty Mid-Cap Stocks to Buy for 2021
Do you want growth potential or financial stability? Why not both? The best mid-cap stocks for 2021 are a group of dual-threat picks.
The market's best mid-cap stocks – companies between roughly $2 billion and $10 billion in market value – are fertile ground for investors who want to have their cake and eat it too. Mid-caps, often referred to as "Goldilocks" stocks, offer a 1-2 punch of financial stability you don't get from small caps, but also greater growth potential than many large caps.
As 2020 proved, large size doesn't guarantee success. From big oil stocks like Halliburton (HAL) that couldn't shake low oil prices to cruise giants like Royal Caribbean (RCL) that were hit hard by COVID-sparked travel bans, we learned that bigger doesn't always mean better when you're entrenched in a sector that's doing poorly.
Of course, if it's tough for the big boys, then it's often even tougher for the little guys. Smaller companies suffering from similar downtrends, but without the deep pockets to stay afloat, have been folding altogether. Global corporate defaults already are at their highest levels since 2009 – and according to Fitch Ratings, they're on pace to top even the highs set during the worst of the financial crisis.
In this environment, some investors have been drawn to mid-cap stocks, which are neither too big to be lumbering and set in their ways, nor too small to gain access to the cash they need to survive a downturn. And in 2021, as growth (hopefully) returns, mid-caps should offer a great deal of rebound potential.
Here, we examine 15 of the best mid-cap stocks to buy for 2021. Each of these midsized companies has garnered plenty of bullish commentary from the analyst community heading into the new year, and they look positioned to run as the American economy gets back on its feet.
Data is as of Oct. 22. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Analyst ratings provided by S&P Global Market Intelligence. Stocks are listed in reverse order of analysts' composite rating.
- Market value: $3.5 billion
- Dividend yield: N/A
- Analyst ratings: 6 Strong Buy, 1 Buy, 3 Hold, 0 Sell, 0 Strong Sell
Yes, that Crocs (CROX, $52.14).
If you wrote off this quirky footwear company 10 years ago, you're not alone. But investors who have ignored CROX in the intervening years might be surprised to learn that this stock has proved more than just a short-lived fad – and in fact, has been on a massive winning streak lately.
Exhibit A: CROX shares are up 370% over the past five years, compared with about 70% for the S&P 500 and 159% for the growthier Nasdaq-100 in the same period.
Exhibit B: The stock is up an impressive 24% year-to-date as it has surged back from its spring lows and significantly outperformed most of its peers.
The reason includes a forecast for 15% revenue growth next year, and a recently inked partnership with pop music star Justin Bieber for "Croctober" that is expected to give a significant lift to numbers. Throw in the current coronavirus pandemic and its boost to casual wear sales over traditional office attire, and the deck is stacked in favor of CROX.
Crocs is soundly profitable, with earnings set to grow by double digits in fiscal 2020 and 2021 alike – Pivotal Research analyst Mitch Kummetz (Buy) says his footwear survey data shows CROX could produce a strong fiscal 2021 start. And more than a decade removed from its heyday, Crocs is showing investors it could be one of the best mid-cap stocks to buy for 2021.
Magellan Midstream Partners LP
- Market value: $8.4 billion
- Distribution yield: 11.0%*
- Analyst ratings: 10 Strong Buy, 9 Buy, 2 Hold, 0 Sell, 0 Strong Sell
Energy stock Magellan Midstream Partners LP (MMP, $37.34) specializes in the transportation, storage and distribution of crude oil and petroleum products. While many investors might be leery of buying energy stocks right now given the volatility in oil prices or the long-term concerns about carbon emissions and climate change, this mid-cap stock offers significant peace of mind as a "midstream" infrastructure play.
While explorers and oilfield service stocks are primarily concerned with drilling and extracting fossil fuels from the earth, MMP operates pipelines that transport gasoline, aviation fuels, and liquefied gases to end users that include refiners, wholesalers, bio-fuel producers, and even railroads and airports that are transporting those commodities even further down the supply chain. Magellan's assets include a 9,800-mile refined products pipeline system with 54 storage terminals, and another 2,200 miles of crude oil pipelines and storage facilities with a capacity of 37 million barrels.
With scale like this, it's easy to see the appeal of this master limited partnership (MLP) as a key infrastructure provider.
Naturally, a lack of demand for the products mentioned above have cramped MMP's share-like "units," which are off more than 40% year-to-date. That would signal some danger in its high distribution, 11% at current prices, but that doesn't appear to be the case. Indeed, during a "fireside chat" with UBS analysts (Buy), management said it "has seen strong momentum away from the bottom and feels comfortable in picking up the buyback strategy again at some point," signaling confidence in its ability to keep generating cash.
And a yield that large, when stable, is much more than just a hedge against future declines – it can be a big profit center for investors who buy in at the right price.
* Distributions are similar to dividends but are treated as tax-deferred returns of capital and require different paperwork come tax time.
- Market value: $2.3 billion
- Dividend yield: N/A
- Analyst ratings: 7 Strong Buy, 3 Buy, 2 Hold, 0 Sell, 0 Strong Sell
When consumers are spending more time at home, a company like TreeHouse Foods (THS, $40.89) is set up remarkably well for growth. As a packaged food and beverage manufacturer that primarily services grocery stores with "private label" foodstuffs, TreeHouse could very well be the company behind your local grocer's store-brand baked goods, chips, frozen foods, cereals, sauces and more.
Not only is this a very reliable business, but TreeHouse has tapped into growth lately both because of the popularity of eating at home along with an investment in enhanced organic foods offerings. This is evident in THS's earnings; the company's earnings topped Wall Street expectations in both Q1 and Q2 of 2020. In fact, if projections hold, we could see an impressive double-digit growth rate in earnings per share for fiscal 2020 over the prior year – a figure you don't normally see in a sleepy packaged foods stock!
And more might be in store for this mid-cap stock in 2021:
"We understand some new business has actually been moved up at the request of certain retailers," writes William Blair's Jon Andersen (Outperform), "and if some new distribution is extended due to retail market conditions, it will serve to provide an underpinning for growth in 2021."
The icing on the cake is that TreeHouse just tapped debt markets for $500 million in long-term capital at a 4.0% interest rate – allowing it to redeem all of its outstanding senior notes due 2022 at a 4.875% rate. Not only will these cost savings immediate boost the bottom line, but THS investors can take comfort in knowing management is deploying capital efficiently to drive shareholder value.
- Market value: $7.4 billion
- Dividend yield: N/A
- Analyst ratings: 6 Strong Buy, 1 Buy, 2 Hold, 0 Sell, 0 Strong Sell
You'd be forgiven if Aecom (ACM, $46.15) doesn't exactly get your pulse pounding. But as a Kiplinger analysis from June revealed, this industrial stock might just be one of the best stocks you've never heard of. And with the stock up nearly 20% since that article's publication, it's worth highlighting ACM once more here among the best mid-cap stocks to buy for 2021.
An engineering firm hit hard by the initial coronavirus downturn, ACM shares have been ascendant since bottoming in mid-March, rebounding into positive territory. The company's architectural planning, consulting and program management services have proven to be stickier than some investors had feared, and strong leadership from Aecom management along with consistent financial performance have made Wall Street perk up and take note.
Specifically, in its August earnings report, AECOM noted revenue was flat year-over-year but adjusted operating income was up 25%, adjusted net income was up 29% and operating cash flow was up 28% as margins improved an incredible 2.2 percentage points.
All this points to an incredibly well-run operation that will not just weather short-term market pressures but fuel ongoing success in 2021 and beyond. And better still, analysts see some hope for stimulus spending to improve Aecom's fortunes.
"We think the increased likelihood of a major infrastructure stimulus is now a function of greater need, as measured by current unemployment levels, and potential for Congressional alignment on funding," writes UBS (Buy), which recently raised its 12-month price target to $54 per share.
- Market value: $4.6 billion
- Dividend yield: 5.1%
- Analyst ratings: 20 Strong Buy, 9 Buy, 4 Hold, 0 Sell, 0 Strong Sell
Recently highlighted by Kiplinger's Dan Burrows as one of the top-rated dividend stocks right now, Diamondback Energy (FANG, $29.17) is incredibly popular right now with Wall Street analysts. Specifically, of 33 total firms covering the stock, FANG has garnered 30 Strong Buys or Buys and just four Holds – without a single sell recommendation.
The energy sector has admittedly been pretty volatile in 2020, in no small part thanks to extreme volatility for oil that included a briefly negative price for crude oil futures in April. But not all oil stocks are created equal, and FANG is uniquely positioned to weather the storm thanks to strong proven energy reserves in the ground – including reserves that are only on private land, unlike some other stocks that could face a rollback of access to federal lands if the White House turns over in 2020.
"FANG has zero exposure to Federal acreage, so if Biden wins the election in November, and subsequently were to impose a ban on new federal drilling permits (as his campaign has suggested it might), FANG would see no impact from such a ban," writes CFRA's Stewart Glickman, who thinks Diamondback is one of the best candidates for a potential takeover.
With earnings growth admittedly dipping this year and revenue set to drop more than 25%, Diamondback clearly faces short-term challenges. However, shares remain up 80% from their 52-week lows and now seem to have normalized after prior production cuts. Specifically, in October, the company re-affirmed its Q4 guidance as operations normalize. And furthermore, its earnings report revealed that FANG has not yet had to tap its revolving credit facility to deal with short-term fiscal pressures.
Nothing is ever certain on Wall Street, and there are particular concerns in the oil patch as of late. But Diamondback seems on better footing than similar-sized peers, and could surprise as one of the best mid-cap stocks of 2021.
- Market value: $6.0 billion
- Dividend yield: N/A
- Analyst ratings: 6 Strong Buy, 3 Buy, 1 Hold, 0 Sell, 0 Strong Sell
With gains of more than 680% in the last 24 months, alternative energy play Plug Power (PLUG, $14.96) has made many investors plenty of money so far. But with a market capitalization of only around $6 billion still and impressive top-line expansion, there could still be plenty of runway left for this fast-moving momentum stock.
For starters, consider that revenues for this hydrogen fuel cell company are expected to surge by 33% this year, then by 35% in 2021, according to Wall Street's pros. The fact that PLUG is not just keeping up its growth rate, but edging it even higher, is a tremendous sign.
While still unprofitable, PlugPower unveiled a very ambitious five-year path to dominance last year that would make it the No. 1 fuel cell company on the planet. On the surface, the expectations might just sound like the pie-in-the-sky musings of a startup – including $1 billion in gross billings, $170 million in operating profits and $200 million in adjusted EBITDA by the end of 2024.
But as each earnings report proves PLUG to be on target so far, Wall Street has had a hard time keeping its hands off this pick.
- Market value: $4.5 billion
- Dividend yield: N/A
- Analyst ratings: 8 Strong Buy, 2 Buy, 2 Hold, 0 Sell, 0 Strong Sell
As one of the select stocks that has handily outperformed the market this year, LendingTree (TREE, $345.17) is certainly worth watching in 2020. In fact, TREE has been worth watching for some time: The specialty finance stock is up about 265% in the last five years vs. roughly 70% for the S&P 500 in the same period.
Most of the growth that we've seen in LendingTree shares has been thanks to its robust digital platform that offers mortgages, consumer credit, student loans and small business loans. The comparison shopping model it uses was very novel to finance when the company got off the ground in 1996, but looks quite familiar to any consumer who has used travel portals to book an airline ticket or hotel. The idea is the same – take a lending process that was once pretty opaque and labor-intensive, and allow prospective borrowers to easily compare offers to make the best decision.
Yes, TREE stock is down a bit from its prior 2020 highs thanks in part to fears that the rising unemployment rate and economic slowdown will naturally sap lending. But there's plenty of reason to believe it will eclipse those highs, as LendingTree is continuing to invest in itself to hit both near-term targets and key longer-term strategic priorities.
"We expect improving revenue over the next several periods to be partially reinvested in greater marketing and investment expense," writes UBS's Eric E. Wasserstrom, who rates the stock at Buy. "While this may result in a more moderate trajectory of EBITDA margin expansion, we believe it will sustain elevated revenue growth over the medium term."
Case in point: Next fiscal year, revenues are set to surge more than 20%, according to Wall Street estimates. If it does indeed meet estimates, TREE could be one of the better-performing mid-cap stocks of 2021.
- Market value: $6.1 billion
- Dividend yield: 1.0%
- Analyst ratings: 5 Strong Buy, 3 Buy, 0 Hold, 0 Sell, 0 Strong Sell
While perhaps not a mainstream brand name that most consumers would know, Hill-Rom Holdings (HRC, $91.07) is very recognizable among those who work in health care for its leading position as a provider of patient beds. These include the conventional beds on hospital floors as well as high-tech surgical stations, intensive care unit beds, other "therapeutic surfaces" that include monitoring and diagnostics capabilities.
Anyone who has spent time in hospital or long-term care facility can tell you: These aren't just spare metal frames with a cheap mattress slapped on top. They typically cost thousands of dollars even without add-on technologies to monitor blood pressure, respiration or other vital signs. The big margins on these beds, along with strong baseline demand, make Hill-Rom a very attractive investment opportunity.
Admittedly, HRC has been wildly volatile in 2020, and is off about 20% year-to-date. But analysts are unanimously bullish on the stock, which has recently earned Buy-equivalent ratings from the likes of KeyBanc Capital ($115 price target) and Needham ($117 PT). Both targets are more than 25% higher than here, if the stock manages to hit them, and likely would put HRC among 2021's best mid-cap stocks.
- Market value: $5.5 billion
- Dividend yield: N/A
- Analyst ratings: 10 Strong Buy, 1 Buy, 2 Hold, 0 Sell, 0 Strong Sell
Regardless of whether you already know the shoe brand, if you've been investing for a while, then you've surely got strong opinions on Skechers USA (SKX, $34.55). Since 2015, the stock has regularly gyrated between the low $20s to the low $40s – so depending on when you bought, SKX is either one of your favorite mid-cap stocks or one you desperately want to forget.
The challenge has been multifold for SKX, but a big factor has been overseas expansion that didn't quite keep pace with investor expectations. One thing that has never been at issue in the minds of many consumers, however, has been the connection with the Skechers brand – which remains quite strong despite the on-again, off-again sentiment on Wall Street.
In 2020, it seems that SKX has finally got its international house in order with about 60% of the company's sales now coming from beyond U.S. borders. Furthermore, it has firmed up margins in these markets – including a very impressive 64.5% gross margin for its global direct-to-consumer sales efforts.
There's risk here, of course, given Skechers' history. But SKX very well could be one of the best mid-cap stocks to buy for 2021, given the timing. Shares remain 20% below where they started 2020, and all signs seem to point to SKX having its house otherwise in order after several years of international fits and starts. Meanwhile, the short-term pain caused by coronavirus disruption earlier this year seems to be fading.
"(We) continue to believe SKX will benefit as consumers exercise/walk more and look for more comfortable footwear during the COVID-19 pandemic," says B. Riley FBR analyst Susan Anderson, who has a Buy rating and $39-per-share price target on the stock.
Kratos Defense & Security Solutions
- Market value: $2.6 billion
- Dividend yield: N/A
- Analyst ratings: 7 Strong Buy, 1 Buy, 1 Hold, 0 Sell, 0 Strong Sell
Kratos Defense & Security Solutions (KTOS, $21.47) is an interesting midcap stock because it is a hybrid between two profitable investing themes: defense and technology.
On the defense side of things, Kratos benefits from close ties with the U.S. government. Specifically, it has consistently generated more than 70% of total revenue from federal contracts with agencies such as the Department of Defense over the last three years. On the technology side of things, however, Kratos continues to develop and deploy various "unmanned systems" that include drones.
This high-growth area doesn't yet drive a ton of cash for Kratos, as it represented just over 22% of total revenue last year. However, KTOS shares surged recently after the military drone manufacturer won a $950 million contract with the U.S. Air Force for drone and space technology, immediately on the heels of a separate $400 million contract in July.
This revenue will come in over the next several years; it won't move Kratos' financials immediately. But a nearly 20% improvement in KTOS stock through late 2020 indicates that investors are bullish about this mid-cap stock's future.
- Market value: $4.5 billion
- Dividend yield: 1.9%
- Analyst ratings: 8 Strong Buy, 1 Buy, 1 Hold, 0 Sell, 0 Strong Sell
Timken (TKR, $60.48) is an industrial firm that designs and manufactures a host of systems used in a variety of applications, including automotive power trains, rotor systems for helicopters, augers for mining equipment and gearboxes for locomotives. In addition to supplying these systems, Timken also services its products for customers.
While revenues might never grow tremendously under this kind of business model, TKR is a well-run operation that continues to generate significant profits year in and year out. For instance, in 2019, its net operating cash flow topped $550 million – up from just $330 million or so in 2018, and $230 million in 2017. (2020 cash is currently on pace to hit roughly $495 million.)
While not completely insulated from coronavirus challenges, Timken has continued to exhibit strong financial discipline in 2020 to build on its recent gains. These include significant and proactive cost reductions in the second quarter to protect margins, including temporary work furloughs and salary reductions. The moves also are expected to generate structural savings that will carry over into 2021 beyond short-term disruptions.
"We continue to believe that through intentional repositioning of the portfolio through targeted R&D, intentionally exiting certain business lines, and strategic M&A, management has repositioned this business to perform better through the cycle," writes Stifel's Stanley Elliott, who rates the stock at Buy.
Timken's entrenched client base and shrewd management are big reasons that despite short-term revenue headwinds, TKR is one of the few industrial stocks that is sitting on modest gains late in 2020. And it could be one of the best mid-cap stocks to buy for 2021 if the economy gets back on track.
- Market value: $6.9 billion
- Dividend yield: N/A
- Analyst ratings: 13 Strong Buy, 1 Buy, 1 Hold, 0 Sell, 0 Strong Sell
If you think this year has been brutal for any company that relies on mall shoppers, then you should take a hard look at Deckers Outdoor (DECK, $247.72) as proof of that fashion-related consumer stocks aren't all dead in the water right now. Specifically, DECK stock is up more than 45% in 2020.
And lest you think this is just a short-term trend, it's also worth noting that Deckers has leaped an impressive 315% or so in the last five years.
The reason for this success is that the footwear, apparel and accessories company has created a durable brand and loyal customer base. Its products include Ugg boots and Teva sandals, among others, and can command premium prices. Furthermore, its strong brand has allowed it to connect directly with customers. In a conference call this spring, CEO Dave Powers noted that online sales surged more than 100% amid the pandemic as loyal customers looked to keep buying DECK products even if they weren't headed out to the mall.
And as recently reported in Kiplinger, Deckers recently was flagged by analysts at UBS as one of eight stocks investors should be bullish on thanks to their "Go It Alone" model.
Some consumer stocks have indeed suffered, as folks might not be buying office apparel or traveling as much amid the coronavirus pandemic. But clearly Deckers has what it takes to connect and is seeing strong performance in 2020 as a result.
- Market value: $3.6 billion
- Dividend yield: N/A
- Analyst ratings: 8 Strong Buy, 2 Buy, 0 Hold, 0 Sell, 0 Strong Sell
Industrial stock MasTec (MTZ, $49.38) is an infrastructure and construction firm that offers engineering services to infrastructure companies that operate in the communications, energy and utility sectors.
This uniquely specialized business is much lower risk than a typical construction firm that may rely on cyclical demand to erect apartment buildings or office parks, and instead depends on the reliable capex of billion-dollar firms that need to maintain gas pipelines, power transfer stations and fiber optic networks. To top it off, MTZ also offers civil engineering services for government infrastructure, including water treatment plants and highways.
It's not exactly a fount of breakneck growth, but this low-risk model is nonetheless appealing to many investors. Furthermore, MTZ boasts a solid backlog of projects, which indicate future performance could be much better than current levels of construction activity reflect. Specifically, in its most recent earnings report, the firm reported a record 18-month backlog of more than $8 billion. That's more than twice the market capitalization of the entire company!
Perhaps most importantly, its Clean Energy and Infrastructure segment surged more than 60% over the prior year as proof that MasTec is looking beyond legacy energy segments and toward sustainable projects that will be increasingly in demand amid climate change concerns. "In 2020, Clean Energy & Infrastructure revenues are estimated to be nearly five times the size of 2017," Credit Suisse analysts (Outperform) add.
All in all, this industrial play might not be the most interesting pick on the list. But it still merits a spot among the best mid-cap stocks to buy for 2021.
- Market value: $3.9 billion
- Dividend yield: 0.3%
- Analyst ratings: 2 Strong Buy, 0 Buy, 0 Hold, 0 Sell, 0 Strong Sell
While some retailers might be struggling amid the coronavirus pandemic, lease-to-own specialist Aaron's (AAN, $58.71) is recovering well thanks to its focus on "underserved and credit-challenged customers." In other words, folks who may have lost their job or are struggling to pay some bills can still find financing at Aaron's when they often couldn't afford a new TV or furniture otherwise.
You can understand why this appeal is perfect for the current environment, with the unemployment rate double what it was at this time last year but folks being stuck at home because of public health concerns. Across the company's network of some 1,450 stores in North America, Aaron's is stepping in quite well right now with projected sales growth of about 5% in fiscal 2020 – and more importantly, earnings per share that will surge 20% from $3.89 to $4.65. Analysts are projecting mid- to high-single-digit revenue and profit increases in 2021, too.
Admittedly, there is risk here, as AAN depends on customers who may not be in the best financial situation, and continued weak foot traffic because of COVID could weigh on its significant brick-and-mortar presence.
Also, the company will be splitting at some point in the future, with Aaron's announcing that its Progressive Leasing and Vive Financial businesses would be spun out as a separate publicly traded unit. "Our Buy rating is based on the excellent growth outlook from the Progressive business, which will likely continue at a double-digit pace on the other side of the virus," write Stifel analysts, so some investors might choose to wait to invest in the standalone Progressive unit.
However, given Aaron's long history managing credit risk and maximizing profits from its operations, there's a lot to like about this specialty retailer right now. The fact that shares have rebounded sharply from their early 2020 lows and recently turned positive on the year is proof Wall Street has taken notice.
- Market value: $2.3 billion
- Dividend yield: 1.3%
- Analyst ratings: 3 Strong Buy, 0 Buy, 0 Hold, 0 Sell, 0 Strong Sell
Virginia-based Brink's (BCO, $46.12) is a security and transportation firm with roots dating back to the Civil War. Many investors might recognize the brand from the iconic Brink's armored cars that have been seen ferrying cash between businesses and banks for many years.
Naturally, given a decline in business to physical stores and banks, Brink's has taken quite the shot from COVID-19. BCO shares are off nearly 50% year-to-date, and its most recent quarterly results showed a 10% decline in revenues (propped up by acquisitions; organic revenues dropped 17%!) and an 18% dip in operating profits.
But analysts are bullish on the firm both because they expect its core services to recover, and because they know Brink's is more than just trucks. The firm has forged beyond armored cars into areas including ATM services, prepaid debit cards and a suite of digital tools to help businesses with cash management.
While the legacy business might not grow at breakneck speed, the entrenched market share of BCO coupled with these more dynamic business lines makes for a compelling investment.
This is most evident in analyst estimates for 2021, which predict revenues will grow 18.6% and profits will jump 90%, which would propel both metrics above 2019 levels. Furthermore, its 15-cent quarterly dividend is not just sustainable but ripe for an increase with earnings per share that should top more than $4 in fiscal 2021.
A combination of reasonable prices on BCO shares and a strong positioning for future success could make Brink's one of the best mid-cap stocks to buy for 2021.