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ETF Specialist

Demystifying U.S. Mid-Cap Indexing

Mid-cap stocks warrant more attention than they currently garner.

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If you stop the average investor walking down the street and ask him what a large-cap stock is, he might respond Apple (AAPL), Alphabet (GOOG), Amazon.com (AMZN), or maybe Bank of America (BAC). However, most investors would probably struggle to name a mid-cap stock, even though names like Burlington Stores (BURL), Tractor Supply (TSCO), and Whirlpool (WHR) may be familiar to them. Mid-cap stocks are often overlooked, and yet, over the past 15 years, they have outperformed both large- and small-cap stocks. There is no structural reason to justify this, nor is there a reason to believe it will continue. However, mid-cap stocks warrant more attention than they currently garner. 

Mid-Caps: The Big Picture
As their name implies, mid-cap stocks fall in the middle of the market-capitalization spectrum between large- and small-cap stocks. These companies may have graduated from the small-cap space and consequently have more mature businesses than smaller companies. These companies typically grow their earnings at a faster clip compared with large companies but are on firmer financial footing compared with small companies. This often makes them attractive acquisition targets.

Venkata Sai Uppaluri does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.