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Best Mid Caps In 2010
This past year was a great one for stocks of all kinds, but especially for mid caps, which saw the S&P 400 Mid Cap Index increase by about one-third in 2009, delivering joy and happiness as the decade came to a close. What lies ahead in the second decade of this millennium is anybody's guess. However, it wouldn't be a New Year without some predictions for 2010. Here goes:
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The Fab Four
Konami Corp. (NYSE: KNM)
Best known for making video games for both the home and arcade markets, Konami also owns health and fitness clubs in Japan and manufactures gaming machines for casinos. The video game division accounts for 45% of revenues, the clubs make another 38% and the remainder is from gaming machines and other corporate revenue. Despite suffering its worst first half in the past five years, Konami still should have an operating profit come March's year-end. As for free cash flow, it should be about half the $214 million generated in fiscal 2009. With a video game market as well as the general economy in recovery mode, 2010 could see a significant rebound in its stock price.
Jacobs Engineering Group (NYSE: JEC)
In November, the engineering and construction services company announced year-end results that, although good, missed analyst estimates. This drove its stock into the ground. To make matters worse, it provided a glum forecast for 2010 and said its backlog in orders was off by $1.5 billion. While not good, it has averaged $324 million in free cash flow the last three years. Long-term, it'll be fine.
Omnicare (NYSE: OCR)
In November, Omnicare paid $98 million to the Department of Justice for its part in a kickback scheme with Johnson & Johnson (NYSE: JNJ). Fortunately, the Kentucky company has great free cash flow to help this go away. As for the stock price, its price-to-earnings, price-to-sales and price-to-book ratios are all much lower today than they've been over the past five years.
Unum Group (NYSE: UNM)
Unum is an insurance company focused on the group market. In the U.S., it's No.1 in group disability and group long-term care as well as No.5 in group life. In the U.K., it's No.1 in critical illness and No.2 in group life. Long-term care insurance, in my opinion, is one of the most-needed yet under-purchased types of insurance out there. Over the last five years, shareholders made 28.6% on their investment versus minus 12.5% for its peers and minus 10.3% for the S&P 500. I see no reason why it can't do it again over the next five.
Bottom Line
I consider myself a value investor first and a GARP investor second. In my opinion, all four companies meet both styles' criteria. (To learn more, see Determining What Market Cap Suits Your Style.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 20 Tools For Building Up Your Portfolio
The Fab Four
Konami Corp. (NYSE: KNM)
Best known for making video games for both the home and arcade markets, Konami also owns health and fitness clubs in Japan and manufactures gaming machines for casinos. The video game division accounts for 45% of revenues, the clubs make another 38% and the remainder is from gaming machines and other corporate revenue. Despite suffering its worst first half in the past five years, Konami still should have an operating profit come March's year-end. As for free cash flow, it should be about half the $214 million generated in fiscal 2009. With a video game market as well as the general economy in recovery mode, 2010 could see a significant rebound in its stock price.
In November, the engineering and construction services company announced year-end results that, although good, missed analyst estimates. This drove its stock into the ground. To make matters worse, it provided a glum forecast for 2010 and said its backlog in orders was off by $1.5 billion. While not good, it has averaged $324 million in free cash flow the last three years. Long-term, it'll be fine.
Omnicare (NYSE: OCR)
In November, Omnicare paid $98 million to the Department of Justice for its part in a kickback scheme with Johnson & Johnson (NYSE: JNJ). Fortunately, the Kentucky company has great free cash flow to help this go away. As for the stock price, its price-to-earnings, price-to-sales and price-to-book ratios are all much lower today than they've been over the past five years.
Unum Group (NYSE: UNM)
Unum is an insurance company focused on the group market. In the U.S., it's No.1 in group disability and group long-term care as well as No.5 in group life. In the U.K., it's No.1 in critical illness and No.2 in group life. Long-term care insurance, in my opinion, is one of the most-needed yet under-purchased types of insurance out there. Over the last five years, shareholders made 28.6% on their investment versus minus 12.5% for its peers and minus 10.3% for the S&P 500. I see no reason why it can't do it again over the next five.
Bottom Line
I consider myself a value investor first and a GARP investor second. In my opinion, all four companies meet both styles' criteria. (To learn more, see Determining What Market Cap Suits Your Style.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Will Ashworth
Will Ashworth lives and works in Toronto, Canada. He's worked in and around the financial services industry for much of his adult life. He loves investing and is passionate about helping others learn how to put their money to work.
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