6 Top Stocks That Turned Large Cap From Mid Cap Amid Pandemic

Wall Street had entered into the bear market six months ago owing to the global outbreak of the deadly coronavirus. The Dow trickled down to bear territory on Mar 11 and was joined by the S&P 500 and the Nasdaq Composite a day later. The market's downtrend continued till Mar 23 when all the three major stock indexes plummeted to their recent troughs.

Wall Street has witnessed a V-shaped recovery since Mar 23, which helped it to exit the coronavirus-induced short bear market and form a new bull market. This impressive turnaround was predominantly driven by the astonishing growth of the large-cap technology stocks.

However, a closer look into the market reveals that apart from large-cap stocks, mid-caps too contributed significantly to the market's turnaround.

Despite facing market turmoil in the first week of September, the three large-cap centric indexes — the Dow, the S&P 500, and the Nasdaq Composite — have rallied 51.2%, 52.3%, and 64.7%, respectively, so far since Mar 23. Likewise, the mid-cap specific S&P 400 Index appreciated 57.1% during the same period.

Meanwhile, in the due course of the S&P 400 Index's fabulous performance in the past five and half months, several mid-cap companies (market capital > $1 billion but < $10 billion) have become large caps (market capital > $10 billion).

We have selected six of these that carry a favorable Zacks Rank. All these stocks had market capital in the range of  $4 billion to $8 billion during Mar 11 - 12, when Wall Street entered the bear market. At present, the market capital of these stocks are in the range of  $11 billion to $25 billion.

Mid-Cap Stocks With Growth Potential

Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks.

If the economic impacts of coronavirus are more severe ahead, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.

On the other hand, if the crisis doesn’t worsen or any good news on the treatment front surfaces,  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.

Our Top Picks

We have narrowed our search to six stocks that have become large caps from mid-caps during the coronavirus-ravaged past six months. All these stocks have strong growth potential and witnessed robust earnings estimate revisions within the last 7 to 60 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). 

The chart below shows the price performance of our six picks in the past six months.

Etsy Inc. (ETSY - Free Report) operates online market places for buyers and sellers primarily in the United States, the U.K., Canada, Australia, France, and Germany. Its online market places include etsy.com and reverb.com.

The Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 88.1% over the last 60 days. The stock price has soared 151.1% in the past six months.

Generac Holdings Inc. (GNRC - Free Report) designs, manufactures and sells power generation equipment, energy storage systems, and other power products for the residential and light commercial and industrial markets worldwide.

The Zacks Rank #1 company has an expected earnings growth rate of 14.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 7 days. The stock price has jumped 90.7% in the past six months.

Catalent Inc. (CTLT - Free Report) provides delivery technologies and development solutions for drugs, biologics, and consumer and animal health products worldwide. It operates through four segments: Softgel and Oral Technologies, Biologics, Oral and Specialty Delivery, and Clinical Supply Services.

The Zacks Rank #1 company has an expected earnings growth rate of 10.9% for the current year (ending June 2021). The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the last 7 days. The stock price has climbed 90.6% in the past six months.

Fortune Brands Home & Security Inc. (FBHS - Free Report) provides home and security products for residential home repair, remodeling, new construction, and security applications. It operates in three segments: Cabinets, Plumbing, and Doors & Security.

The Zacks Rank #1 company has expected earnings growth of 5.6% for the current year. The Zacks Consensus Estimate for the company's current-year earnings has improved 25% over the last 60 days. The stock has surged 72% in the past six months.

Wayfair Inc. (W - Free Report) is one of the world's leading online sellers of home goods products, consisting of furniture and home decor. The Zacks Rank #2 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 60 days. The stock has rallied 701.9% in the past six months.

Pool Corp. (POOL - Free Report) is the world's largest wholesale distributor of swimming pool supplies, equipment, and related products. In addition, it is a leading regional wholesale distributor of irrigation and landscape products.

The Zacks Rank #2 company has an expected earnings growth rate of 13.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 22.3% over the last 60 days. The stock has advanced 60.6% in the past six months.

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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