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Dec. 8, 2017, 7:30 a.m. EST

Here are Wall Street’s 19 favorite mid-cap stocks for 2018

A set of mixed results from last year — ranging from a decline of 40% to a gain of 74% — shows how difficult it is to pick stocks in the short term

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By Philip van Doorn, MarketWatch


Bloomberg
Analsyts expect shares of Nabors Industries to rise 35% over the next 12 months.

(This is the second in a three-part series on analysts’ favorite stocks for 2018. The series began with <CROSSREF GUID="{9D9B8F90-D6A5-11E7-8BB4-26F71ABE4CAE}" DOCTYPEID="" FILE-NAME="" ENCODING-DATE="">large-cap stocks</CROSSREF> and ends with <CROSSREF GUID="{66999024-D9C4-11E7-AC5A-3BD373DEA959}" DOCTYPEID="" FILE-NAME="" ENCODING-DATE="">small-cap stocks</CROSSREF>.)

A year ago, when we listed analysts’ favorite mid-cap stocks for 2017, we were in the midst of the post-election market spike and talk centered around the possibility that the Republican majorities in both houses of Congress might work with President Trump to repeal the Affordable Care Act.

With that failed attempt seeming to be ancient political history, all eyes are focused again on Congress, with the expectation that the House of Representatives and the Senate will approve a combined tax reform bill and send it to Trump, maybe by the end of the year.

Lowering the federal corporate income-tax rate to 20% from the current 35% might be even more important for mid-cap and small-cap companies than it is for the largest U.S. companies. Smaller companies tend to have more concentrated domestic businesses. That means fewer tax loopholes to exploit.

Investors are baking in their tax-reform expectations (and the higher profits that would bring) into stock prices. The S&P 400 Mid-Cap Index /zigman2/quotes/210599897/delayed MID -0.10%  is trading for 18.5 times weighted aggregate consensus 2018 earnings estimates, among analysts polled by FactSet. A year ago, it was trading for 17.5 times consensus 2017 EPS estimates.

So mid-cap stocks are more expensive. Despite that, there are 19 stocks among the S&P 400 Mid-Cap Index with majority “buy” ratings that analysts expect to rise at least 25% over the next 12 months, based on consensus price targets. A year ago there were only 14.

Before showing you the new list, here’s how analysts’ favorite mid-cap stock picks from a year ago have fared:

Company Ticker Industry Closing price - Dec. 6, 2016 Consensus price target - Dec. 6, 2016 Implied 12-month upside potential as of Dec. 6, 2016 Closing price - Dec. 1, 2017 Price change - Dec. 6, 2016, through Dec. 1, 2017
Diebold Nixdorf Inc. /zigman2/quotes/206289339/composite DBD Electronic Equipment/ Instruments $22.95 $35.20 53% $19.10 -17%
Akorn Inc. /zigman2/quotes/208960448/composite AKRX Pharmaceuticals $18.94 $28.46 50% $32.90 74%
TRI Pointe Group Inc. /zigman2/quotes/204302452/composite TPH   Homebuilding $12.15 $16.86 39% $17.65 45%
Dycom Industries Inc. /zigman2/quotes/205114296/composite DY Engineering & Construction $73.71 $101.71 38% $109.41 48%
Manhattan Associates Inc. /zigman2/quotes/206041868/composite MANH Software $52.73 $70.38 33% $44.20 -16%
Telephone and Data Systems Inc. /zigman2/quotes/200740609/composite TDS Wireless Telecommunications $28.37 $37.00 30% $27.32 -4%
Uniti Group Inc. /zigman2/quotes/203478257/composite UNIT Real Estate Investment Trusts $25.32 $32.57 29% $16.37 -35%
Helen of Troy Ltd. /zigman2/quotes/205565021/composite HELE Electronics/ Appliances $83.00 $106.25 28% $88.90 7%
SM Energy Co. /zigman2/quotes/209677692/composite SM Oil & Gas Production $37.23 $47.59 28% $22.32 -40%
Royal Gold Ltd. /zigman2/quotes/203440759/composite RGLD Precious Metals $69.73 $88.92 28% $82.86 19%
Steris PLC /zigman2/quotes/203973646/composite STE Medical Specialties $66.21 $83.86 27% $89.65 35%
Ciena Corp. /zigman2/quotes/208745450/composite CIEN Telecommunications Equipment $21.00 $26.45 26% $21.73 3%
Acxiom Corp. Advertising/ Marketing Services $25.56 $32.00 25% $27.59 8%
Hill-Rom Holdings Inc. /zigman2/quotes/200618216/composite HRC Medical Specialties $55.02 $68.75 25% $84.22 53%
Source: FactSet

Communications Sales & Leasing Inc. changed its name to Uniti Group Inc. /zigman2/quotes/203478257/composite UNIT -1.35% on Feb. 27.

Oh, how wrong they were

Once again we see how difficult it is for anyone to pick stocks for relatively short periods. Yes, 12 months is a short period for stocks, which should be considered long-term investments (requiring commitments of several years) unless you are a professional day trader.

But as we saw with the large-cap list, the focus of the brokerage industry and the financial media on quarterly earnings results and ratings based on 12-month price targets doesn’t serve investors well.

From Dec. 6, 2016 (when we pulled the data for last year’s list) through Dec. 1, 2017, the S&P 400 Mid-Cap Index rose 14%.

• Only six of analysts’ favorite mid-cap stock picks from a year ago outperformed the index.

• Only five of the stocks did as well or better than analysts’ consensus price targets indicated they would do.

/zigman2/quotes/210599897/delayed
US : S&P US
1,936.76
-1.89 -0.10%
Volume: 424.15M
Oct. 18, 2019 5:08p
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/zigman2/quotes/206289339/composite
US : U.S.: NYSE
$ 9.05
-0.47 -4.94%
Volume: 944,808
Oct. 18, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$694.55 million
Rev. per Employee
$198,965
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/zigman2/quotes/208960448/composite
US : U.S.: Nasdaq
$ 4.61
-0.09 -1.91%
Volume: 1.75M
Oct. 18, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$581.52 million
Rev. per Employee
$312,621
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/zigman2/quotes/204302452/composite
US : U.S.: NYSE
$ 16.05
+0.22 +1.39%
Volume: 1.84M
Oct. 18, 2019 6:30p
P/E Ratio
12.24
Dividend Yield
N/A
Market Cap
$2.28 billion
Rev. per Employee
$2.27M
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/zigman2/quotes/205114296/composite
US : U.S.: NYSE
$ 50.68
+1.59 +3.24%
Volume: 406,963
Oct. 18, 2019 6:30p
P/E Ratio
26.98
Dividend Yield
N/A
Market Cap
$1.60 billion
Rev. per Employee
$209,631
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/zigman2/quotes/206041868/composite
US : U.S.: Nasdaq
$ 78.36
-3.17 -3.89%
Volume: 618,473
Oct. 18, 2019 4:00p
P/E Ratio
53.29
Dividend Yield
N/A
Market Cap
$5.04 billion
Rev. per Employee
$186,386
loading...
/zigman2/quotes/200740609/composite
US : U.S.: NYSE
$ 25.70
+0.15 +0.59%
Volume: 383,244
Oct. 18, 2019 6:30p
P/E Ratio
19.49
Dividend Yield
2.57%
Market Cap
$2.94 billion
Rev. per Employee
$1.89M
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/zigman2/quotes/203478257/composite
US : U.S.: Nasdaq
$ 7.65
-0.11 -1.35%
Volume: 1.61M
Oct. 18, 2019 4:00p
P/E Ratio
27.38
Dividend Yield
2.62%
Market Cap
$1.48 billion
Rev. per Employee
$1.27M
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/zigman2/quotes/205565021/composite
US : U.S.: Nasdaq
$ 159.06
+0.18 +0.11%
Volume: 161,194
Oct. 18, 2019 4:00p
P/E Ratio
22.82
Dividend Yield
N/A
Market Cap
$4.00 billion
Rev. per Employee
$1.05M
loading...
/zigman2/quotes/209677692/composite
US : U.S.: NYSE
$ 7.21
-0.43 -5.63%
Volume: 3.21M
Oct. 18, 2019 6:30p
P/E Ratio
18.68
Dividend Yield
1.39%
Market Cap
$813.70 million
Rev. per Employee
$2.68M
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/zigman2/quotes/203440759/composite
US : U.S.: Nasdaq
$ 121.86
+1.42 +1.18%
Volume: 503,520
Oct. 18, 2019 4:00p
P/E Ratio
85.08
Dividend Yield
0.87%
Market Cap
$7.99 billion
Rev. per Employee
$18.69M
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/zigman2/quotes/203973646/composite
US : U.S.: NYSE
$ 143.37
+0.22 +0.15%
Volume: 901,161
Oct. 18, 2019 6:30p
P/E Ratio
38.46
Dividend Yield
1.03%
Market Cap
$12.14 billion
Rev. per Employee
$227,494
loading...
/zigman2/quotes/208745450/composite
US : U.S.: NYSE
$ 38.45
+0.40 +1.05%
Volume: 1.46M
Oct. 18, 2019 6:30p
P/E Ratio
27.07
Dividend Yield
N/A
Market Cap
$5.95 billion
Rev. per Employee
$536,617
loading...
/zigman2/quotes/200618216/composite
US : U.S.: NYSE
$ 102.03
-0.19 -0.19%
Volume: 216,951
Oct. 18, 2019 6:30p
P/E Ratio
32.14
Dividend Yield
0.82%
Market Cap
$6.82 billion
Rev. per Employee
$286,180
loading...
/zigman2/quotes/203478257/composite
US : U.S.: Nasdaq
$ 7.65
-0.11 -1.35%
Volume: 1.61M
Oct. 18, 2019 4:00p
P/E Ratio
27.38
Dividend Yield
2.62%
Market Cap
$1.48 billion
Rev. per Employee
$1.27M
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