Some folks are calling the recent rotation into mid-cap stocks the Great Rotation of 2024. Indeed, it was a historic and quite rare event to see the American mid-cap plays make up for lost time with robust one-week gains, even as the S&P 500 and tech-heavy Nasdaq 100 showed signs of weakness. The mid-cap scene looks like a more value-conscious place to get growth these days, at least compared to those bid-up tech plays that are now in free-fall!
Of course, investors should be careful when investing in the mid-cap names. When it comes to smaller firms with relatively modest market caps, you must put in extra effort to ensure a steady balance sheet, especially since the cost of debt has risen in recent years. Further, you should seek to pay a fairly reasonable price, even for the ones that promise next-level growth. Indeed, small- and mid-cap companies can experience drastic drops in growth rates, even before their market caps have a chance to swell up.
In any case, I view various mid-cap stocks as worth pursuing right now, whether or not the Great Rotation has any legs going into August and September. Here are two intriguing TSX mid-cap stocks that may be worth buying and holding for the long haul if you’re looking to grow beyond the large-cap firms.
Onex
Onex (TSX: ONEX) is a lesser-known investment firm with a modest $7.2 billion market cap. Perhaps the company is best known for being the parent company to Westjet Airlines. Beyond the big name in air travel, we have a slew of intriguing business service and software companies, many of which you may never have heard of.
Additionally, the company has businesses that span the healthcare and even financial industries. More recently, Onex Partners acquired Accredited, a financial services firm in the business of P&C program management. With a mere 7 times trailing price-to-earnings (P/E) multiple, I find ONEX stock to be a fantastic deal now that shares have slipped close to 13% since its 52-week high.
It’s been a slow and steady descent into Spring and Summer of 2024. But this one is more than buyable as the firm heads into its second-quarter earnings results, on tap for August 8, 2024.
Leon’s Furniture
Leon’s Furniture (TSX: LNF) is a mere $1.5 billion furnishing retailer that’s been soaring of late, up around 21% in the past year. With results also up ahead, I do view the name as a potential breakout candidate. The valuation is still cheap (with shares trading at 12.7 times trailing P/E), and the dividend (2.6% yield) is still quite rich. And with a wide moat around the Canadian furniture business, I wouldn’t dare bet against the name as it heads into its big day.
As the firm looks to back its own stock while pursuing a wide range of strategic efforts to grow and boost value for shareholders, I wouldn’t shy on the name just yet. The rally has legs and they may be strong enough to propel LNF stock well past $30 per share.
