Market capitalization is a key characteristic investors use when categorizing and evaluating stocks for portfolios. Oftentimes, stocks in the middle, known as mid-caps, are overlooked in favor of fast-growing smaller companies or well-established larger ones. Mid-cap stocks are typically defined as those with market capitalizations of anywhere between $2 billion and $10 billion.
Many mid-cap stocks offer the potential for strong returns. Below, we take a look at mid-cap stocks that have not fared as well recently but that may present opportunities to buy low. These are some of the worst-performing mid-cap companies as measured by one-year trailing total return as of April 4, 2022.
- The worst-performing mid-cap stocks have all provided one-year trailing total returns below -63% as of April 4, 2022.
- These stocks include DraftKings, Pinterest, Wayfair, Zillow Group, and Zoom Video Communications.
- Some of these mid-cap stocks have been hindered by a return to in-person work and school following a large-scale shift to online, at-home practices during the COVID-19 pandemic.
- Others have struggled to maintain profitability or steady user-base growth.
DraftKings Inc. (DKNG)
DraftKings Inc. (DKNG) is a digital sports entertainment and gaming business that offers fantasy sports, iGaming, and other betting services as well as casino gaming software. One reason DraftKings stock may have faltered is its difficulty in achieving consistent profitability. The company announced guidance for FY 2022 EBITDA of between -$825 million and -$925 million. DraftKings Class A shares have provided a one-year total return of -69.7%.
Pinterest, Inc. (PINS)
Pinterest Inc. (PINS) provides an online product and idea discovery platform. Users gather and share ideas on a variety of topics. The company generates revenue from digital ad sales and other ecommerce features. Pinterest has run into a problem plaguing many social media and online community companies: at a certain point, it becomes difficult to continue to draw a steady stream of new users. For the fourth quarter of 2021, the company's monthly active user rate declined. Pinterest Class A shares provided one-year returns of -68.1%.
Wayfair Inc. (W)
Wayfair Inc. (W) is an ecommerce company operating in the U.S. and Europe. It provides furniture, decor, housewares, and a variety of other home goods. Net revenue for the most recent quarter fell by more than 11% year over year (YOY) as the company has struggled to maintain sales through the shifting COVID-19 pandemic. Perhaps even more striking is the fact that active customers declined by 12.5% YOY for the same period. Wayfair Class A shares have posted returns of -67.1% over the past year.
Zillow Group, Inc. (ZG)
Zillow Group, Inc. (ZG) provides real estate services through platforms including Zillow.com, Trulia, and HotPads. The company's platforms provide real estate rental and sale listings and generate revenue from third-party broker activity on online marketplaces. Late in 2021, the company announced it would no longer engage in house flipping because of the unpredictable housing market and that it would downsize significantly. The stock dropped significantly in response. At this point, Zillow Class A shares have provided returns of -64.6% in the past year.
Zoom Video Communications, Inc. (ZM)
Zoom Video Communications, Inc. (ZM) offers a communications platform with video, voice, and chat features. Its popularity boomed during the early part of the COVID-19 pandemic as businesses and schools shifted operations online. However, as regulations have eased and in-person work and education has resumed in most areas, the company may see signficiantly lower demand. Zoom has provided one-year total returns of -63.8%.
What are some of the worst-performing mid-cap stocks?
Some of the worst-performing mid-cap stocks, based on one-year trailing total returns as of April 4, 2022, include DKNG, PINS, W, ZG, and ZM.
What is the reason for faltering performance among these stocks?
While there is not a single reason, some of these stocks have fared poorly based on the COVID-19 pandemic and the transition back to in-person modalities. Others have struggled to maintain growth in customer bases.
What are some ways to invest in mid-cap stocks?
The Bottom Line
Investors looking to target mid-cap stocks in particular may wish to focus on a mid-cap ETF. Broad mid-cap funds like the Vanguard Mid-Cap ETF offer exposure across this segment of the market capitalization spectrum. There are also mid-cap funds with specific thematic or geographic focuses.