This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Strong earnings and good valuations power mid-caps

By Jane Edmondson

Mid-cap stocks have posted strong returns year-to-date, outpacing their smaller and larger cap counterparts. This was particularly the case in February with the Russell Midcap Index up 5.9% and the S&P 400 Index advancing 4.5%.

So what factors are driving returns? Earnings have been reasonably good in the mid-cap sector and valuations are less stretched than for many small cap names.

EQM Capital's Mid Cap Quant portfolio had a solid performance in February, and is now up 9.5% year-to-date on a net of fees basis. Identifying niche players with strong fundamentals has been the core driver of our outperformance.

Shutterstock (SSTK) was of the stocks in the Mid Cap Quant portfolio that had a good month in February. The online marketer of digital stock photography content beat quarterly earnings estimates and guided up earnings and revenue estimates for the year.

The company has a fast-growing collection of more than 33 million images and 1.5 million video clips, making it an online hub for image needs.

FleetCor Technologies (FLT) is another portfolio holding that had a great February. FleetCor, a provider of fuel cards and payment services, just reported a record year in which it closed seven acquisitions and signed six new partnership deals.

Credit card giants MasterCard and Visa are also executing well, in my view. But FleetCor is gaining investor notice as nice smaller cap alternative in the space. Again, this is another niche name identified by our model.

Ubiquiti Networks (UBNT) and Kate Spade (KATE), formerly known as Fifth & Pacific, both better-than-expected earnings results.

In my opinion, wireless equipment manufacturer Ubiquiti and apparel maker Kate Spade are defying the negative trends in their respective industries, gaining market share and delivering strong results despite seemingly adverse conditions.

Sometimes a timely sell trade can make your month. The portfolio sold local discount deal marketer Groupon (GRPN) before it reported earnings results.

The model identified weakening trends going into earnings. A weakening model score, coupled with our concerns about weather-related weakness in the space encouraged us to sell out of the position.

Finally, even a good month has a disappointing name in the portfolio. Portfolio holding Tyler Technologies (TYL) declined in February after missing earnings estimates by a penny. It also guided earnings and revenues below consensus.

Tyler provides IT management solutions for the public sector. The company has several new government contracts wins, so we are reserving our judgment on their disappointing results for now, but we are keeping an eye on the name as a possible sell in the future.

Looking forward, I believe that strong earnings and fundamentals continue to be rewarded by the market. I have no way of knowing this for sure, but we continue to find niche opportunities in the Mid Cap segment that are generating alpha relative to the benchmark.

DISCLAIMER: The investments discussed are held in client accounts as of February 28, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable. Past performance is no guarantee of future results.

Jane Edmondson

Jane Edmondson

I am Jane Edmondson, Founder of EQM Capital, a San Diego-based registered investment advisory firm that uses a data-driven approach

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
YHOO $36.58 -1.00%
AAPL $95.03 -2.90%
FB $117.52 7.90%
GOOG $691.20 -2.10%
TSLA $247.54 -1.60%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs