Neither Too Big Nor Too Small, Midcaps May Turn Out to be “Just Right”!

Sheaff Brock Investment Advisors Indianapolis Mid-Cap Performance analysis

Neither Too Big Nor Too Small, Midcaps May Turn Out to be “Just Right”!

Most investors are accustomed to paying attention to small company stocks (they’re exciting) or large caps (they’re familiar), but often need to be reminded of a third, sometimes “forgotten,” asset class that has the potential of being (as Goldilocks would put it) “just right” for their portfolios.

With the necessary caveat that “past performance is no guarantee of future results,” Sheaff Brock Mid-Cap 10 portfolio manager Paul Coan likes to point out that midcap stocks tend to be more stable than smallcaps while offering a better return potential than their larger cousins.

While different commentators may classify stocks in different ways, there are essentially five categories: micro, small, midcap, large, and mega.

Coan, who has served as portfolio manager for the Mid-Cap 10 for the past three years, characterizes it as “an aggressive growth portfolio of up to ten mid-cap stocks trading on the NASDAQ exchange and powered by a momentum algorithm.”

A bit arcane for typical investors? Mid-Cap 10 chooses just ten stocks out of the hundreds listed on the NASDAQ exchange. Starting with stocks from the twelve equity sectors—consumer discretionary, consumer staples, energy, financials, healthcare, industrials, information technology, materials, telecommunications, utilities, capital goods, and miscellaneous, there are three steps to Sheaff Brock’s proprietary process of stock selection:

One: the “best” stock (based on quantitative measures, Price/Earnings, etc.) is chosen from each of the twelve equity sectors.

Two: The next best 110 stocks, regardless of sector, are selected.

Three: stocks are sorted by a specialized computer “algorithm” for momentum, narrowing down to ten stocks total.

The Mid-Cap 10 is a high turnover portfolio—400% a year, according to Coan, managed though a unique combination of research and automation (combined human and computer power).

Micro and small stocks may seem more exciting; large and mega stocks may be more familiar. Could it be, though, that midcaps turn out to be an asset class that, like the porridge, the chair, and the bed Goldilocks selected, are “just right” for your portfolio?

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