Is now the time to add midcap stocks to investor portfolios? The “Magnificent Seven” may have devolved into something more of a Fab Four, but diversification among large caps doesn’t diminish the case for midcaps. Small and midcap firms, when identified by the right investing team, can stand out, too. Most significantly, economic trends may support a shift toward greater upside in smaller firms.
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One strategy offering access to those firms, the T. Rowe Price Small-Mid Cap ETF (TMSL ), may appeal to investors. The fund actively invests for a 55 basis point fee, which is competitive in the category.
In doing so, it seeks small and midcap stocks that stand out via bottom-up stock selection. TMSL’s managers apply factors like profitability, stability, projected growth rates, and earnings quality, as well as cash flow, sales, and other attributes. So what kind of stocks are standing out therein?
TechnipFMC PLC (FTI)
TechnipFMC PLC works in the offshore oil and gas development space. It develops subsea equipment and construction services. The firm has seen 22.6% quarterly YoY revenue growth, per YCharts. It has returned 94.5% over one year, significantly outperforming the returns of the broader S&P 500 Total Return Index (SPXTR).
Textron Inc(TXT)
Next, TXT offers a different sector exposure. Per YCharts, the firm operates in specialty aircraft like helicopters, small jets, and more. The company has returned 33.4% for investors over one year, outperforming SPXTR in that time. It’s putting up a 15.00 forward P/E ratio.
Corpay Inc (CPAY)
Finally, with a third different sector, payments firm CPAY may intrigue. It has returned 47.2% as an investment over one year compared to 28.7% for SPXTR. It also offers a solid forward P/E ratio of 16.25 per YCharts.
All of these firms could potentially benefit from rate cuts, for example, as easing borrowing can mitigate ongoing costs for equipment, growth, or other needs. TMSL itself has returned nearly 10% YTD and may appeal to investors considering smaller company stocks.
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