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5 Must-Buy High-Yielding Mid-Cap Stocks to Tap Market Rally

Nalak Das
·6 min read

The market, which has been declining since mid-February owing to the spread of coronavirus, witnessed a steep fall on Mar 23. Thereafter, the market has been rallying barring some occasional fluctuations.

Although, the market is not out of the woods yet as the deadly virus continues to spread across the United States that compelled President Donald Trump to extend partial lockdown till Apr 30, Wall Street is no doubt highly oversold.

Meanwhile, the devastating effect of the coronavirus on the economy is already factored in market valuation. Moreover, an unprecedented fiscal and monetary stimulus injected by both the Trump administration and the Fed, and several large Eurozone economies and various important emerging countries to protect the global economy from shrinkage, significantly influenced the ongoing market rally.

Wall Street Witnessing a Rally

On Mar 30, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied 3.2%, 3.4% and 3.6%, respectively. This succeeded one of Wall Street's historically strongest weekly gains last week ended Mar 27, wherein these three stock indices — the Dow, the S&P 500 and the Nasdaq Composite — had jumped 12.8%, 10.3% and 9.1%, respectively.

At present, the Dow, the S&P 500 and the Nasdaq Composite have bounced 20%, 17% and 13%, respectively, from their lowest level recorded on Mar 23, after these three indexes entered the bear market territory during Mar 9-10. Despite the rally, these stock indexes — the Dow, the S&P 500 and the Nasdaq Composite —  are still down 23.6%, 21.7% and 20.1%, respectively, from their all-time highs recorded last month. Further, year to date, these indexes are down 21.8%, 18.7% and 13.4%.

Meanwhile, it looks like that the panic selling of equities by market participants — popularly called as selling everything — is over. (Read More: Has the Market Bottomed Already?)

This is primarily because of extremely low stock market valuation on account of the unprecedented non-financial hazard to global financial markets. The continuation of northbound market movement is evident from the fact that even a historic high weekly jobless claims has resulted in an impressive stock rally on Mar 26.

Why High-Yielding Mid-Cap Stocks?

Investment in mid-cap (market capital > 1 billion but < 10 billion) stocks is often recognized as a good portfolio diversification strategy. These stocks combine attractive attributes of both small and large-cap stocks.

If economic impacts of coronavirus become more severe, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure. Moreover, a high dividend payout ratio of these companies will provide a regular income stream.  

However, crisis doesn’t worsen or any good news surfaces from the treatment front,  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. During the recovery phase, many of these mid-cap stocks may join large-cap league.

Our Top Picks

We have narrowed down our search to five high-yielding mid-cap stocks currently trading at an attractive valuation. 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 month.

 

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ManTech International Corp. MANT is a leading provider of innovative technologies and solutions for mission-critical national security programs for the Intelligence Community, the Departments of Defense, State, Homeland Security and Justice, the Space Community and other U.S. federal government customers.

The company has an expected earnings growth rate of 9.6% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 4.6% over the past 30 days. The stock offers a dividend yield of 1.81% and is still 19.2% below its 52-week high.

PennyMac Financial Services Inc. PFSI is engaged in the mortgage banking and investment management activities in the United States. It operates through three segments: Loan Production, Loan Servicing and Investment Management.

The company has an expected earnings growth rate of 67.5% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 48.6% over the past 30 days. The stock offers a dividend yield of 2.00% and is still 44% below its 52-week high.

PLDT Inc. PHI operates as a telecommunications company in the Philippines. The company operates in three segments: Wireless, Fixed Line, and Others. The company has an expected earnings growth rate of 14.9% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 10.6% over the past 30 days. The stock offers a dividend yield of 5.24% and is still 21.6% below its 52-week high.

James River Group Holdings Ltd. JRVR provides specialty insurance and reinsurance services in the United States. The company’s Excess and Surplus Lines segment underwrites liability and property insurance on an excess and surplus commercial lines basis in all states and the District of Columbia.

The company has an expected earnings growth rate of 46.4% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 1% over the past 30 days. The stock offers a dividend yield of 3.60% and is still 33.3% below its 52-week high.

Innovative Industrial Properties Inc. IIPR is a real estate investment trust focusing on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for medical-use cannabis facilities.

The company has an expected earnings growth rate of 63% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 4.3% over the past 30 days. The stock offers a dividend yield of 4.95% and is still 42.6% below its 52-week high.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?

Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2020 today >>


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ManTech International Corporation (MANT) : Free Stock Analysis Report
 
PLDT Inc. (PHI) : Free Stock Analysis Report
 
PennyMac Financial Services, Inc. (PFSI) : Free Stock Analysis Report
 
James River Group Holdings, Ltd. (JRVR) : Free Stock Analysis Report
 
Innovative Industrial Properties, Inc. (IIPR) : Free Stock Analysis Report
 
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Zacks Investment Research