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. Apart from the large-cap specific three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — the mid-cap specific S&P 400 also witnessed a similar trend.

The market is not yet out of the woods owing the rapid worldwide spread of coronavirus and its devastating impact on the U.S. and global economy. Meanwhile, the negative effect of coronavirus on the economy is already factored in market valuation.

Moreover, an unprecedented $8 trillion fiscal and monetary stimulus injected by both the Trump administration and the Fed along with another $7-$8 trillion relief package provided by several large Eurozone economies, Japan and various important emerging countries to protect the global economy from shrinkage, significantly influenced the ongoing market rally.

Similar Trends Observed in Large-cap and Mid-cap  Indexes

The mid-cap specific S&P 400 index has been trending much like its large-cap peers during the coronavirus-induced market turmoil. The Dow recorded its all-time high on Feb 12 while both the S&P 500 and the Nasdaq Composite posted all-time highs on Feb 19. Likewise, the S&P 400 registered its recent highs on Feb 20.

The Dow entered the bear market territory on Mar 11 and the S&P 400 also fell into that bracket on the same day. Both the S&P 500 and the Nasdaq Composite entered the bear territory a day later. The three major stock indexes recorded the lowest of the last bear market on Mar 23 and the S&P 400 also posted the lowest level that day.

Moreover, the Dow, the S&P 500 and the Nasdaq Composite - managed to come out of the bear territory on Mar 26, Apr 8 and Apr 14, respectively. The S&P 400 got rid of the bear market on Mar 27. Additionally, the Dow, the S&P 500 and the Nasdaq Composite are still down 20.5%, 17.6% and 13.7% from their all-time highs while the mid-cap benchmark is 29.4% below its recent high.

Market's Worst is Behind Us

It looks like panic selling of equities by market participants — popularly called as selling everything — is over. This is primarily because of extremely low stock market valuation on account of the unprecedented non-financial hazard to the global financial markets. While it is certain that volatility will remain part of regular trading at least for the next few months, extreme volatility will likely recede.

Meanwhile, if the crisis doesn’t worsen or any good news surfaces on the treatment front,  mid-cap 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 the large-cap league.

Our Top Picks

We have narrowed down our search to five mid-cap stocks that have skyrocketed in the past month and still have upside left. Each of our picks sports a Zacks Rank#1 (Strong Buy). 

The chart below shows the price prformance of our five picks in the past month.

Livongo Health Inc. (LVGO - Free Report) provides an integrated suite of solutions to the healthcare industry in North America. Its solutions promote health behavior change based on real-time data capture supported by intuitive devices and insights driven by data science.

The company has an expected earnings growth rate of 51.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 24% over the past 60 days. The stock price has soared 77.9% in the past month.

Karuna Therapeutics Inc. (KRTX - Free Report) is a clinical-stage biopharmaceutical company, primarily focusing on developing novel therapies to address disabling neuropsychiatric conditions characterized by significant unmet medical needs.

The company has an expected earnings growth rate of 41.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 15.7% over the past 60 days. The stock price has jumped 28.3% in the past month.

Sprouts Farmers Market Inc. (SFM - Free Report) operates in a highly fragmented grocery store industry offering a unique model that features fresh produce at the center of the store, an expansive bulk foods section and a vitamin department focused on overall wellness.

The company has an expected earnings growth rate of 8.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 12.4% over the past 60 days. The stock price has climbed 24.8% in the past month.

PennyMac Financial Services Inc. (PFSI - Free Report) 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 106.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 82.9% over the past 60 days. The stock price has rallied 23.4% in the past month.

Strategic Education Inc. (STRA - Free Report) provides a range of post-secondary education and non-degree programs in the United States. It operates through three segments: Strayer University, Capella University, and Non-Degree Programs.

The company has an expected earnings growth rate of 14.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 3.4% over the past 60 days. The stock price has advanced 22.4% in the past month.