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15 Mighty Mid-Cap Stocks to Buy for 2021

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30.10.2020

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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.

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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.

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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.

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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%........

© Kiplinger


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