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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.

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