The mid-cap universe is definitely worth looking into if you’re a young investor with aspirations of putting the TSX Index to absolute shame. Indeed, the smaller the market cap, the greater the degree of volatility you’ll go up against. That said, the potential rewards could make the choppier roller-coaster ride worth your while. Indeed, higher rewards tend to come at the cost of higher risk. In the case of the following mid-cap, though, I see a lesser magnitude of risk compared to firms that are multitudes its size.
Indeed, just because a firm is smaller than average does not necessarily mean it’s a risky or even speculative play. If the cash flows are steady, consistent, and growing (in a preferably predictable fashion), you may have all the makings of a truly magnificent hidden gem of a stock.
In this piece, we’ll examine one that I think will beat the TSX Index, not just in 2024 but over the next three to five years (and perhaps even beyond that).
Boyd stock: A great hidden gem to load up on for 2024-25?
Consider shares of well-run auto-body repair shop chain Boyd Group Services (TSX:BYD), a TSX lightweight with a market cap of $6.6 billion at the time of writing.
Indeed, it may or may not fit the definition of a mid-cap stock in Canada after its recent run (I think the largest mid-cap stocks are in the range of having a $5 billion market cap). That said, I think the lesser-known play is worth stashing on your radar as it rolls into earnings, which are on tap for March 20, 2024.
So, what’s there to love about the firm behind Body Autobody and Gerber Collision & Glass (as it’s known in the U.S.)?
The firm seems to have perfected the “growth-by-acquisition” model. Undoubtedly, there are ample synergies to be had by scooping up and optimizing the mom-and-pop repair shops. Moving ahead, there’s still a ton of runway to make deals and drive value for the firm’s long-term shareholders. With plans to invest considerable sums into tech infrastructure upgrades, I’d argue that Boyd’s share price momentum could continue for many years, even without much help from the rest of the market.
Indeed, collision and glass repair is somewhat less sensitive to the state of the economy. As accidents continue to happen, Boyd will continue to get business. What happens when self-driving cars take the roads?
If you head to parts of California, you might just see a robotaxi without anybody in the driver’s seat.
The Foolish bottom line on BYD stock
Personally, I believe too many regulatory hurdles exist such that the world will shift gears to full self-driving. We could be at least a decade away from fully autonomous roads. If we ever get to that point, though, Boyd could find themselves in a bit of a pickle, especially if self-driving cars minimize accidents. Until then, though, Boyd’s an earnings growth gem to watch closely.
