October 2, 2023

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Should These 3 Top-Performing Mid-Caps Be On Your Watchlist?
In a familiar story, midcaps Targa Resources (NYSE: TRGP), Carlisle Companies (NYSE: CSL) and Steel Dynamics (NASDAQ: STLD), the largest components of the S&P 400 mid-cap index, all gapped down Friday along with the broader market.
Mid-caps are traditionally classified as those with market capitalizations between $2 billion and $10 billion, but all three exceed that level. In fact, Targa and Carlisle have market caps above $13.1 billion, which is the minimum to be included in the large-cap S&P 500. All three are larger than some S&500 components. (Indexes don’t automatically kick stocks out when their market caps become too large or too small. Instead, changes may come when they re-constitute, at regular intervals throughout the year.)
Together, those three stocks comprise about 1.94% of the index. That’s a far cry from the S&P 500, where the top three components, Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN), which together account for more than 16% of the index, therefore having an outsized effect on total performance. 
Mid-caps have some characteristics of both large- and small-caps, in that they are often more stable than smaller stocks, but can still have better upside potential than larger names. 
Targa is a Houston-based company engaged in the processing, sale, storage and transportation of natural gas and crude oil. The company operates in the Permian Basin and other shale-rich areas. Like many energy firms, it slashed capital spending in 2020 as investors demanded that reduction. The company suffered a loss of $7.26 per share that year, followed by a smaller loss in 2021. 
Last year, the company slashed debt, but it still has a high debt-to-equity ratio. That’s not uncommon in capital-intensive businesses like oil-and-gas gathering and production. 
The stock itself has outperformed its index, returning 27.30% year-to-date, vs. the S&P 400’s decline of 20.36%. That’s in large part to the outperformance of the broader energy sector this year. 
So what are the forward-looking projections for this stock? 
Wall Street is eyeing earnings per share of $4.06 this year, following last year’s loss. Next year, earnings are expected to come in at $5.53 per share, which would be a gain of 36%. 
Of course, it remains to be seen whether demand for energy remains at the anticipated levels, but that’s true right now of all sectors in a potentially shaky economy.
Should These 3 Top-Performing Mid-Caps Be On Your Watchlist?
Mid-cap peer Carlisle Companies is a Scottsdale, Arizona, firm that designs and manufactures products including braking systems, specialty chemicals, lawn and garden equipment, roofing systems, and aerospace products.
This stock, too, is outpacing its index, with a 2022 return of 13.16. The stock fell 6.14% the week ended September 23, but at this juncture, it’s too soon to try deciphering chart patterns and ascertaining whether a stock’s correction looks productive. That part depends on the broader market.
That means it’s more constructive to turn to the fundamentals. The company has a long history of profitability, as MarketBeat earnings data reveal. It also tends to beat revenue views. While that may seem like a rear-view mirror view, companies that beat estimates tend to continue along that trajectory.
For the full year, Wall Street expects Carlisle to earn $20.29 per share, a gain of 115%. 
Should These 3 Top-Performing Mid-Caps Be On Your Watchlist?
Steel Dynamics is another company with a solid track record of profitability. 
There are two opposing forces at work that could affect the Indiana-based manufacturer of flat-rolled, structural, rails, bars, and other steel products. First, the work-from-home trend could mean less construction of office buildings, which rely on the company’s products.
However, the recently passed Inflation Reduction Act includes incentives for sourcing domestically-produced steel and other metal components. 
As of now, analysts have a “hold” rating on the stock, according to MarketBeat analyst data. That seems appropriate for a company that’s straddling divergent trends. 
Analysts’ consensus price target on the stock is $92.71, an upside of 32.09%. 
This stock, too, has outpaced its index, with a year-to-date return of 14.18%.
At this juncture, consider very carefully whether you want to add any stocks to your portfolio, as there’s no sign that capitulation has arrived. However, when building your watchlist, consider top-performing mid-caps with good prospects and a solid history of profitability. 
Should These 3 Top-Performing Mid-Caps Be On Your Watchlist?
Before you consider Targa Resources, you’ll want to hear this.
MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and Targa Resources wasn’t on the list.
While Targa Resources currently has a “Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
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