Which Mid Cap Stock Will Come Out On Top?
We’re excited about the NCAA Division I “March Madness” Basketball tournament this month, so in honor of the event we thought we’d run a tournament of our own. Stock Rover has never been very good at basketball, but it has always been good at comparing equities, so with that in mind we set up a tournament more appropriate to the program’s skill set. We also thought it was high time that mid cap stocks take center stage, as we often focus on large caps in our webinars and blog posts, and we have already run a webinar on small caps .
Thus we bring you March Midness! Where 32 mid cap stocks will battle it out on the financial courts. Mid caps (generally considered to be stocks that have between a $2 and $10 billion market cap) are often described as being a “sweet spot” in the investing world, because they can offer substantial growth potential with less risk than small caps.
Here’s how the tournament works. There will be five themed rounds of competition. In each, the competing stocks will be compared in a handful of simple, straightforward tests. The winner of each round moves up. In the event of a tie, we have tiebreakers. At the end, we’ll be left with one stock that has passed all the tests and warrants serious consideration as a potential investment. We’ll probably also have discovered a few other contenders that could make for strong picks as well. These are the five rounds:
- Earnings Growth
- Financial Health
- Competitive Advantage
- Valuation and Risk
A few things to keep in mind: We’re approaching this from a buy-and-hold perspective, and we’re also going to be dividend-neutral. (For an in-depth look at how to pick good dividend stocks, see our dividend growers blog series .) Finally, as a disclaimer, the competition is not a completely comprehensive assessment, so while we hope the winning stock is indeed a strong pick, we are certainly not recommending that you buy it based on this competition alone. After March Midness is over and done with, we’ll evaluate the winning stock and the process used to find it (call it April Appraisal).
To select the competitors, I’ve created the following ranked screener :
This finds the top 32 mid cap companies that perform well in selected growth, profitability, and valuation categories. Additionally, we are filtering for companies that have not underperformed their industry in the last two years. The screener is meant to yield a strong population—ideally, any stock on this list could prove to be a strong pick. Here is the list of passing stocks on March 12th, 2015, in alphabetical order:
I’ve put these stocks into a watchlist, from which I will eliminate the losing stocks each round. Both the screener and the watchlist are available in the Stock Rover library , so you can follow along at home or run the competition yourself. Because it was a ranked screener, the passing stocks were scored and ranked, which gives us the seeding. Here is the official tournament bracket:
So make yourself a bowl of popcorn (or a hotdog and a beer) and stay tuned! Later this week we’ll learn which stocks are our Sweet Sixteen. Follow along or create your own tournament with this blank March Midness bracket .