U.S. stock markets have retreated in January after a sharp rally in 2023. The euphoria surrounding technology stocks evaporated as the yield on the benchmark 10-Year U.S. Treasury Note returned northward, trading above 4%.
This was primarily owing to the uncertainty regarding the time when the Fed would initiate the first cut in the benchmark interest rate. Recently, a few key Fed FOMC members said that although they believe that the rate hike regime is over, they are yet to be convinced that the economic condition is conducive enough for an immediate rate cut.
This triggered an alarm among market participants and resulted in volatile trading at the beginning of 2024. At present, the CME FedWatch tool is showing a just 32.4% probability that the central bank will initiate a 25 basis point rate cut in its March FOMC meeting. Last week, the probability of the first rate cut was more than 90%.
Why Mid-Cap Stocks
Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked, mid-cap stocks have a high potential to enhance their profitability, productivity, and market share. These may also become large-cap over time.
If economic growth slows down due to any unforeseen internal or external disturbance, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.
On the other hand, if the economy continues to thrive, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to capital markets.
Our Top Picks
We have narrowed our search to five mid-caps that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Finally, each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past year.
Zacks Investment Research
Image Source: Zacks Investment Research
DaVita Inc. DVA has been expanding its global presence via its Integrated Kidney Care business. DVA has been generating solid revenues by providing dialysis services. DVA has been opening and acquiring several dialysis centers both within the United States and overseas, which is promising. A strong solvency position is an added plus.
DaVita has an expected revenue and earnings growth rate of 2.7% and 4.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 9.1% over the last 30 days.
monday.com Ltd. MNDY develops software applications in the United States, Europe, the Middle East, Africa, and internationally. MNDY provides Work OS, a cloud-based visual work operating system that consists of modular building blocks used and assembled to create software applications and work management tools.
MNDY also offers product solutions for work management, sales CRM, software development verticals, business development, presale, and customer success services. MNDY serves organizations, educational or government institutions, and distinct business units of an organization.
monday.com has an expected revenue and earnings growth rate of 28.1% and 15.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the last 30 days.
GitLab Inc. GTLB offers GitLab, a DevOps platform, which is a single application that leads to faster cycle time and allows visibility throughout and control over various stages of the DevOps lifecycle. GTLB helps organizations in the United States, Europe and Asia Pacific to plan, build, secure, and deploy software to drive business outcomes. GTLB also provides related training and professional services.
GitLab has an expected revenue and earnings growth rate of 26% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days.
Light & Wonder Inc. LNW strives to be a leading cross-platform global games company with a focus on content and digital markets. LNW operates through three segments, namely, Gaming, SciPlay, and iGaming. The buyout of the privately held mobile and social game firm Come2Play has expanded and diversified SciPlay’s existing portfolio.
LNW aims to create games and evergreen franchises that can be made available to players on any platform they want to play. Solid traction for gaming operations in North America and healthy demand for COSMIC and MURAL cabinets are the key growth drivers.
Light & Wonder has an expected revenue and earnings growth rate of 6.8% and 97.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11% over the last 60 days.
Sarepta Therapeutics Inc.’s SRPT first DMD drug, Exondys 51, registered impressive growth in the past few quarters. The trend is expected to continue. SRPT’s two new DMD drugs, Vyondys 53 and Amondys 45, also show strong demand trends. These three drugs have the potential to treat one-third of DMD patients.
In June 2023, the FDA approved SRPT’s Elevidys, the first-ever gene therapy treatment for DMD. The development of its promising next-generation DMD candidate is progressing well. SRPT’s new focus is on developing gene therapies with diversified targets, including LGMD, which looks promising.
Sarepta Therapeutics has an expected revenue and earnings growth rate of 46.7% and more than 100%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
