Nobody loves the thrill of stock-picking more than I do. However, sometimes I just don't have the time or desire to do the kind of research I like to do. That's when I hire a fund manager to do the work for me ... for free. Here's how you can do it too.

IN PICTURES: World's Greatest Investors

Means to an End
Though my goal is to teach a technique, this isn't just an academic exercise - I really am trying to pinpoint a group of stocks I suspect are still undervalued and ripe for more gains: the mid caps.

In a September 2 analysis I mentioned that small caps looked as if they were poised to lead this bull market like they led the last one. The same data also showed, however, that mid-cap value stocks were running a very close second, as they also did during the previous bull market.

I don't think it's a coincidence that mid-cap funds are also the leading group so far this year. That's a bit of a surprise considering the small-cap indexes, which aren't actively managed, are actually the market's winners since the March bottom.

That's the polite way of saying that mid-cap fund managers are either: very good, swimming in the right pool, or both. Regardless of the reason, as a long-term mid-cap bull, I want to ride those coat-tails in my efforts to outperform the market.

The Professional's Picks
Unfortunately for fund managers - but fortunately for us - any fund's top holdings are required to be disclosed on a quarterly basis. Find the top mid-cap funds, and odds are you'll find several of the mid-cap group's top stocks.

To give credit where credit is due, I found five very attractive mid caps by dissecting just three funds: the Appleseed Mid Cap Value Fund, the Monteagle Informed Investor Mid Cap Growth Fund and the RidgeWorth Mid Cap Value Equity Fund.

Those funds were among the consistently strong performers for the year so far. No, it's not a great deal of time, but we're just looking for stock ideas at this point - not long-term fund positions.

Though not a particularly scientific assembly, the mid-cap stocks below were either commonly held by more than one fund, strong performers for that fund or undervalued - and some were a combination of all three. Most importantly though, all five look as if they have more upside ahead of them - history is irrelevant for new positions.

Mid-Cap Stock Trailing 12 Mo. P/E Forward P/E - Next Fiscal Year
Noble Corp. (NYSE:NE) 6.1 7.2
Mattel Inc. (NYSE:MAT) 17.4 12.7
Harris Corp. (NYSE:HRS) 127.5 9.9
Myriad Genetics Inc. (Nasdaq:MYGN) 35.4 18.3
Netflix, Inc. (Nasdaq:NFLX) 27.6 20.7

Caveats
Don't assume that a fund still owns the stocks you came across, as the top-holding snapshots are history; you could be buying what they're selling. Moreover, you can't assume the fund manager owned a certain stock during the high-performance period. The fund examination is simply to uncover ideas you may have never considered, with the indirect benefit of knowing an institution was interested in it at one point. In other words, you still need to do your own due diligence.

The Bottom Line
Nevertheless, a leading fund is a leading fund for a reason, and we just named five mid-cap stocks that the fund industry's top performers were, or are, interested in. That's not a bad place to start. And if you decide that's still a little too much work, you can always choose to simply buy the fund. (For more, check out Determining What Market Cap Suits Your Style.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  2. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  3. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  4. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  5. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  6. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  7. Stock Analysis

    The Safest Stocks You Can Invest in Right Now

    These stocks are likely to hold up better than others in a bear market, but there's a twist.
  8. Investing Basics

    5 Reasons to Expect Lower Stock Returns

    Lower stock returns are likely here to stay for some time. Here are five reasons why.
  9. Investing Basics

    What to Cut From Your Portfolio Right Now

    Owning stocks may shortly become too scary for your portfolio. Here's why, and here are some alternatives.
  10. Personal Finance

    Careers: Equity Research Vs. Investment Banking

    Equity research is sometimes viewed as the unglamorous, lower-paid cousin to investment banking. In this article, we compare the two careers.
RELATED TERMS
  1. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  2. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  3. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  4. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  5. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  6. Impact investing

RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!