Seeking Alpha
Value, long only, special situations, deep value
Profile| Send Message|
( followers)  

The valuations for the large cap stocks have been rich for a while. In the last many weeks we have seen curious rotation in the market. Investors are leaving the small company stocks indiscriminately as well as growth stocks in droves and moving their money into what the media calls "value stocks". I say curious because, there are not many real values in the large cap stocks. Not today, nor were there many few months ago.

The meaning of the term "value" is being stretched. This is unfortunate. However, this may turn out to be an opportune time to hunt for ideas in small and mid cap names.

So here we go. These companies have been screened for good earnings yield and pricing relative to their book value. I have kept the market cap between $1 B and $13 B to give a selection of mid capitalization stocks. It continues to surprise me to find these lists made up almost entirely of financials. Shows the relative absence of good valuations in the market even as you go down the market capitalization ladder. We do our best and when good ideas are scarce, cash wins.

It should not be a surprise however to see a Greek bank and few Latin American names in this list. As usual, take this list as a first cut. Deeper dive is necessary before deciding to commit capital to any of these ideas.

List of Best Mid Cap Investing Ideas for 2014

Company NameStockSectorMarket CapP/E (Price/TTM Earnings)Price/BookDividend Yield
COMPANHIA PARANAENSE DE ENERGIA - COPELELPUtilities$4.0B7.390.68~6.5%
POPULAR INCBPOPFinancials$3.2B40.68-
MBIA INC.MBIFinancials$2.4B7.90.67-
NATIONAL BANK OF GREECENBGFinancials$8.7B5.371.1-
VOYA FINANCIAL INCVOYAFinancials$9.4B8.90.670.11%
FIDELITY & GUARANTY LIFEFGLFinancials$1.3B5.50.841.19%
PETROBRAS ARGENTINA SAPZEEnergy$1.2B7.30.79-
ASSURED GUARANTY LTDAGOFinancials$4.5B4.60.871.75%
ENDURANCE SPECIALTY HOLDINGS LTDENHFinancials$2.3B8.20.782.62%
ARGO GROUP INTERNATIONAL HOLDINGS LTDAGIIFinancials$1.3B90.791.50%
PARTNERRE LTD.PREFinancials$5.5B8.50.822.47%
FLAGSTAR BANCORP INC.FBCFinancials$978.3M7.10.9-
PROSPECT CAPITAL CORPPSECFinancials$3.3B8.10.913.75%
APOLLO INVESTMENT CORPAINVFinancials$2.0B70.969.66%
VALIDUS HOLDINGS LTDVRFinancials$3.4B8.10.943.19%
ASPEN INSURANCE HOLDINGS LTDAHLFinancials$3.0B9.90.891.73%
NOBLE CORP PLCNEEnergy$8.0B90.934.78%
XL GROUP PLCXLFinancials$9.0B9.80.891.93%
ENSCO PLCESVEnergy$12.4B8.70.965.65%
MONTPELIER RE HOLDINGS LTDMRHFinancials$1.5B8.50.981.59%
PLATINUM UNDERWRITERS HOLDINGS LTDPTPFinancials$1.7B9.40.980.50%

Please note that ELP pays dividends twice a year and the rate is not consistent. The dividend yield is an estimate based on history and has been conveniently rounded off. However, I am sure this gives a good idea. PSEC and AINV are Business Development Companies and there are some peculiarities to how they function. Insurance companies should typically do well in the rising inflation environment, so if you believe this is likely, it is worth looking into some of these ideas.

From my perspective, looking overseas in countries where the stock market has suffered recently is a great option as valuations are likely to be much better and a little hedge against potential USD decline in the future makes sense (rising interest rates and rising inflation would eventually mean weaker currency). I still tip toe around banks but would like to leave these names in here as your risk appetite may be higher.

Disclosure: No positions

Source: 21 Best Mid Cap Investing Ideas For 2014