The mid-cap stocks don’t get nearly enough coverage these days. Undoubtedly, the mid-cap universe can be quite intimidating for new investors who may feel just a tad hesitant to put a bit of money to work on names that may prove a rockier ride with no guarantee of greater gains.
Indeed, mid-cap stocks won’t be everyone’s cup of tea. That said, fewer retail investors looking at such names, I believe, means a greater chance to purchase shares at a market price that may be markedly lower than its worth.
Undoubtedly, market inefficiencies may just be able to pave the way for better results over the long term for investors who are able to put in the homework and pick up shares when most other folks would rather just bet on the biggest and most well-covered names (think the Magnificent Seven companies in the U.S.).
While I think larger market caps should make up the core of your TFSA (Tax-Free Savings Account) fund, younger investors seeking next-level growth may find value in checking out the lesser-known mid-cap names. In this piece, we’ll check out two on the Canadian market that I believe are gems worth grabbing before the year’s end.
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Jamieson Wellness
Who says mid-cap investing has to be ultra-risky? Jamieson Wellness (TSX: JWEL), a producer of vitamins, minerals, and other supplements (think protein products), has a well-established brand, an impressive long-term growth narrative (think international growth), and potential catalysts that seem to be brewing.
For years, shares of JWEL have been a slog. The stock is still down around 19% from its brief 2020 peak. At this juncture, shares look way too cheap at 17.45 times forward price to earnings (P/E). Further, the dividend yield is pretty bountiful at 2.38%. Sure, it’s no dividend heavyweight, but it’s a firm that could grow its dividend at an impressive rate through the next decade and beyond.
Notably, as Jamieson continues expanding into China, a massive growth market, JWEL stock may be revalued as more of a growth company. For now, the Chinese economy is down and out, but in due time, I think a comeback bodes well as Jamieson looks to level up its growth. In the meantime, Jamieson is poised to benefit from secular tailwinds (an increase in health consciousness) as a market leader in Canada.
The $1.47 billion mid-cap stock looks intriguing now that it’s got some positive momentum behind it built up in recent quarters.
Spin Master
Spin Master (TSX: TOY) is a $3.25 billion Canadian gem that’s been a shockingly volatile ride. With a 1.85 beta, investors placing their bets in the name had better fasten their seatbelts.
With the digital games business, a prior source of strength, starting to drag its feet, questions linger as to how the firm can make up for lost time after slumping over the past five years. I think most of Spin’s woes are due to the wobbly economy and consumer behaviour shifts from inflation.
As demand for discretionary goods bounces back, Spin stands out as a major beneficiary. It’s a cherished toy firm with many of the big brands. And though the timing will be difficult, I think the strong brands and depressed multiple (9.17 times forward P/E) are enough to get behind the stock while it’s hurting.
