Over the past few weeks, changes in the stock market and investor sentiment have come to the fore. The euphoria around big tech has partly cooled off and other sectors, such as energy, retail, and travel are seeing more action. There is also much market uncertainty due to rising bond yields and the threat of rising inflation.
In this environment, investors need to exercise caution in their stock picking. We believe mid-caps stocks are ideal if the market pullback continues. They do not offer the same stability as their large-cap brethren but their response to market volatility is relatively restrained. Furthermore, mid-cap stocks deliver diversification in a portfolio and often represent a good risk-return trade-off.
Mid-cap stocks attracted much less attention than large-cap stocks or hot start-ups last year, but many have a unique appeal and have performed well amid the pandemic. Arrow Electronics, Inc. (ARW), Jabil Inc. (JBL), Herbalife Nutrition (HLF), and Sanderson Farms (SAFM) are four mid-cap stocks that look promising and we think are poised to deliver strong returns in the long run.
Arrow Electronics, Inc. (ARW)
ARW is involved in providing products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions in the Americas, Europe, Africa, Asia Pacific, and the Middle East. Global Components and Global Enterprise Computing Solutions are the two segments through which it operates.
ARW has entered into a North American distribution agreement with Park Place Technologies, a data center hardware maintenance provider. ARW will help Park Place to expand its services within its Discover, Monitor, Support, and Optimize (DMSO) strategic approach to infrastructure management.
ARW’s revenue for the fourth quarter ended December 31, 2020, climbed 15% year-over-year to $8.45 billion. A 54% growth in the Asia-Pacific components sales for the quarter led its revenue higher. Its EPS for the quarter rose to $3.89 from $1.36 posted in the same period last year.
Analysts expect ARW’s revenue for the year ending March 31, 2021 to be $8 billion, representing a 24.9% year-over-year decline. Its EPS for the quarter is expected to surge 135.3% to $2.28.
ARW has climbed 80.6% over the past year to close yesterday’s trading session at $105.7. Over the past six months, the stock has advanced 33.1%.
It’s no surprise that ARW has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ARW has an A grade for Growth and a grade of B for both Value and Quality. In the B-rated, 42-stock Technology - Electronics industry, it is ranked #9.
In addition to the POWR Rating grades I've just highlighted, you can see the ARW ratings for Stability, Momentum, and Sentiment.
Jabil Inc. (JBL)
JBL delivers manufacturing services and solutions globally through two segments--Electronics Manufacturing Services and Diversified Manufacturing Services. The company also specializes in three-dimensional mechanical design that includes the analysis of electronic, electro-mechanical, and optical assemblies.
JBL has expansion plans which involve a $25 million investment in its subsidiary Ecologic’s Manteca in California and the buildout of a new paper bottle plant in its Sustainability Center of Excellence in Tortosa, Spain. With these expansions, JBL wants to deliver Ecologic’s innovative pulp molding capabilities to new geographies. It also wants to enable the production of hundreds of millions of new paper packages.
During the fourth quarter, ended November 30, 2020, JNL’s revenue climbed 4.3% year-over-year to $7.8 billion. Its Diversified Manufacturing Services’ revenue climbed 13%, while its Electronics Manufacturing Services’ revenue declined 4%. Its EPS for the quarter increased to $1.31 from $0.26 posted in the same period last year.
Analysts expect JBL’s revenue for the quarter ending February 28, 2021 to be $6.6 billion, representing a 7% year-over-year rise. Its EPS is expected to grow at the rate of 13.5% per annum over the next five years.
JBL ended yesterday's trading session at $47.71, rallying 74.7% over the past year. During the past six months, JBL surged 55.5%.
Based on its bright prospects, JBL has an overall rating of B, which translates to a Buy in our POWR Rating system. JBL has a Growth and Value Grade of B. In the C-rated, 80-stock Technology - Services industry, it is ranked #10.
Click here to see the additional POWR Ratings for JBL (Stability, Quality, Sentiment and Momentum)
Herbalife Nutrition (HLF)
HLF is a global leader in nutrition solutions across North America, Mexico, Central America, the Middle East, Africa, Europe, and the Asia Pacific region. Weight management, sports and fitness, targeted nutrition, energy, and outer nutrition are some of the main areas of its operation.
In February, HBL launched its first auto sales center in Bengaluru, India. The automated product vending kiosk will dispense the company’s products with the goal of enhancing its agility by delivering efficient customer experiences with minimal touchpoints.
During the fourth quarter, ended December 31, 2020, HBL’s revenue increased 15.6% year-over-year to $1.4 billion, representing record fourth quarter sales. The rise in revenue was driven primarily by its growth in the North American markets. Its EPS for the quarter climbed to $0.59 from $0.42 posted in the same period last year.
A consensus revenue estimate for the quarter ending March 31, 2021 is $1.4 billion, signaling a 14.1% year-over-year increase. Its EPS for the quarter is expected to grow 32.5% to $1.10.
HLF ended yesterday’s trading session at $47.09, climbing 60.7% over the year. During the past six months, HLF declined 3.5%.
HLF’S strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. HLF has a Value and Quality Grade of A and a Growth grade of B. In the B-rated, 12-stock Medical - Consumer Goods industry, it is ranked #4.
To see additional POWR Ratings for Momentum, Sentiment, and Stability for HLF, Click here.
Sanderson Farms (SAFM)
SAFM is a vertically integrated poultry operator that produces, processes, and sells frozen. fresh, and partially cooked or marinated chicken products across the United States. Ice-packed, bulk-packed, chill-packed, and frozen chicken are the company’s main products.
During the first quarter, ended January 31, 2021, SAFM’s revenue climbed 10.5% year-over-year to $909.3 million. Its EPS for the quarter was $0.42 compared to a loss per share of $1.76 posted in the prior year period. Chairman and CEO Joe F. Sanderson, Jr., stated that market prices for boneless breast meat produced at its plants were under pressure in the first two months of the COVID-19 pandemic but SAFM saw more favorable trends in January and February and retail demand picked up.
Wall Street expects SAFM’s revenue for the quarter ending April 30, 2021 to be $1 billion, representing a 17.8% year-over-year increase. Its EPS is expected to grow at the rate of 108.9% per annum over the next five years.
SAFM ended yesterday’s trading session at $163.75, climbing 32.6% over the year. During the past six months, SAFM soared 33.6%.
SAFM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. SAFM has a Growth grade of A and a Value, Momentum, Sentiment, and Quality grade of B. In the 82-stock Food Makers industry, it is ranked #2.
To see additional POWR Ratings for SAFM, Click here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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ARW shares were trading at $105.01 per share on Friday afternoon, down $0.06 (-0.06%). Year-to-date, ARW has gained 7.92%, versus a 5.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.
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