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5 Mid-Cap Stocks to Buy in a Volatile April

U.S. stock markets have been retreating in April after a sharp rally in the last 15 months. The euphoria surrounding the first rate cut in the benchmark lending rate in June by the Fed evaporated as the yield on the benchmark 10-Year U.S. Treasury Note returned northward, trading around 4.5%.

This was primarily due to a sticky inflation rate despite a restrictive monetary policy and an extremely high interest rate regime in the last 24 months. At present, the CME FedWatch shows just a 17% chance of a rate cut in June. The majority of the respondents are now expecting the first reduction of the Fed fund rate to happen in September.

In the last couple of weeks, as many as 15 Fed officials said that they are in no hurry to initiate a rate cut, though the majority of these officials still believe that at least one rate cut of 25 basis points will happen this year. Market participants are also concerned regarding the visibility of the Fed’s much-hyped “soft landing” of the economy.

Why Should You Invest in Mid-Cap Stocks?

Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked, mid-cap stocks have a high potential to enhance their profitability, productivity, and market share. These may also become large-caps over time.

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If economic growth slows down due to any unforeseen internal or external disturbance, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.

On the other hand, if the economy continues to thrive, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to capital markets.

Our Top Picks

We have narrowed our search to five mid-caps (market capital > $5 billion, < $10 billion) that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the past 60 days. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past three months.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Allison Transmission Holdings Inc. ALSN achieved record sales in 2023, primarily on robust demand from the North America On-Highway end market. ALSN expects strong results from the unit this year as well. For the full year, Allison Transmission envisions record total sales in the range of $3.05-$3.15 billion, up from $3.03 billion generated in 2023.

The strategic buyouts of Walker Die, C&R Tool & Engineering, Vantage Power, the Off-Highway transmission portfolio of AVTEC and AxleTech’s electric vehicle system division are set to boost ALSN’s long-term prospects. Regular product launches, including FracTran, TerraTran and the 3414 Regional Haul Series fully automatic transmission, bode well. ALSN’s electric solutions promise growth opportunities.

Zacks Rank #1 Allison Transmission has an expected revenue and earnings growth rate of 2.1% and 3.2%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.6% over the past 60 days.

SM Energy Co. SM is set to expand its oil-centered operations in the coming years buoyed by an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. SM Energy has roughly 155,000 net acres in South Texas and operates two drilling rigs and one completion crew. Notably, operating wells in the Austin Chalk allow SM to diversify its portfolio and mitigate risks related to regional demand and supply.

SM Energy expects its total 2024 production to exceed the prior-year figure by 3-4%. As an upstream company, SM is poised to benefit from the ongoing favorable crude price environment. Higher production and better prices are expected to improve SM’s financial performance and aid free cash flow generation.

Zacks Rank #1 SM Energy has an expected revenue and earnings growth rate of 5.5% and 2.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past seven days.

Lancaster Colony Corp. LANC is a manufacturer and marketer of specialty food products for the retail and foodservice markets. LANC’s wholly-owned subsidiaries, including T. Marzetti Company, produce and market high-quality national and regionally-branded food products throughout the United States for the retail and food service markets.

Most of LANC’s products sold through the retail channel are marketed under its popular brand names, such as Marzetti, New York Brand Bakery, Sister Schubert's and Flatout. LANC’s production plants across the United States make an expanded family of quality food products found every day on the dinner tables of millions of consumers, as well as in well-known restaurant chains nationwide.

Zacks Rank #2 Lancaster Colony has an expected revenue and earnings growth rate of 3.1% and 34%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days.

Primerica Inc. PRI provides financial products and services. PRI assists its clients in meeting their needs for term life insurance, which it underwrites, and mutual funds, variable annuities and other financial products, which it distributes primarily on behalf of third parties.

PRI’s mission is to serve middle-income families by helping them make informed financial decisions and providing them with a strategy and means to gain financial independence. PRI’s sales representatives use its proprietary financial needs analysis, or FNA, tool and an educational approach to demonstrate how its products can assist clients in providing financial protection for their families, saving for their retirement and managing their debt.

Zacks Rank #2 Primerica has an expected revenue and earnings growth rate of 5.5% and 10.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days.

Jackson Financial Inc. JXN provides suite of annuities to retail investors in the United States. JXN operates through three segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. Jackson is the marketing name for Jackson Financial Inc., Jackson National Life Insurance Co. and Jackson National Life Insurance Co. of New York.

Zacks Rank #2 JXN has an expected revenue and earnings growth rate of more than 100% and 21.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SM Energy Company (SM) : Free Stock Analysis Report

Primerica, Inc. (PRI) : Free Stock Analysis Report

Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report

Lancaster Colony Corporation (LANC) : Free Stock Analysis Report

Jackson Financial Inc. (JXN) : Free Stock Analysis Report

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Zacks Investment Research