Definition of Mid-Cap Stock

What is a Mid-Cap Stock

A mid-cap stock is the stock of a company with a medium-size market capitalization, which is generally between $2 billion and $10 billion USD. Market capitalization, or market cap, is the total market value of a publicly traded company's outstanding shares, calculated by multiplying the current market price of a single share by the total number of outstanding shares.

(Market cap = Share price × Number of outstanding shares)

Mid-caps occupy the space between large-cap and small-cap companies and are often in the growth phase of their business cycle. Current examples of mid-cap stocks are Chesapeake Energy Corporation (CHK), Teva Pharmaceutical (TEVA), Eastman Chemical Company (EMN) and Caesars Entertainment (CZR).To see more mid-cap stocks, click here.

 

Benefits of Investing in Mid-Cap Stocks

• Higher Growth: Mid-cap companies often have more room for growth and expansion as compared to large-cap companies, which can lead to higher returns for investors if the companies perform well.
• Diversification: The addition of mid-cap stocks in an investment portfolio can provide better diversification, helping to spread risk across different market segments.
• Lower Volatility: While mid-cap stocks may be more volatile than large-cap stocks, they tend to be less volatile than small-cap stocks, providing a balance between risk and potential return.
• Innovation and Adaptability: Mid-cap companies may be more agile and adaptable to market changes and technological advancements, positioning them for long-term growth.

Challenges of Investing in Mid-Cap Stocks

• Less Stability: Mid-cap companies are usually less established and stable as compared to large-cap companies. This can make them more susceptible to economic downturns, industry disruptions or competitive pressures, which may affect their stock prices and financial performance.
• Limited Analyst Coverage: Mid-cap stocks often receive less attention from analysts and institutional investors as compared to large-cap stocks. This can make it more difficult for investors to gather information and make informed investment decisions, as there may be less research and expert opinion available for review.
• Liquidity Risk: Although mid-cap stocks generally have better liquidity than small-caps or micro-caps, they may still have lower trading volumes as compared to large-cap stocks. This can lead to wider bid-ask spreads, making it more challenging for investors to buy or sell shares at their desired price.
• Management and Operational Risks: Mid-cap companies may face challenges related to management, corporate governance or operational efficiency, which can impact their stock prices and overall financial health.

 

When investing in mid-cap stocks, it is important to conduct thorough research, as these companies may not be as well-known or as widely covered by analysts as compared to large-cap companies. Investors should consider the company's financial health, growth prospects, competitive advantages and management team before making an investment decision. Investors should also consider their risk tolerance, investment goals and time horizon to determine if mid-cap stocks are a suitable addition to their portfolio.

GlobEx Markets Financial Dictionary of Terms, Phrases and Concepts

The GlobEx Markets financial dictionary is a reference resource that provides the definitions and explanations of various financial terms, phrases and concepts that are used in international finance and global investing. It includes a broad range of financial terms, such as those related to stocks, bonds, currencies, commodities, options, futures, crypto and much more.

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Related Investment Terms

Micro-Cap Stock

Nano-Cap Stock

Small-Cap Stock