Random Thoughts – Midcaps

Through 12/31/18, the S&P MidCap 400 Index posted a 20-year compound annual growth rate (dividends included) of 9.7% versus 5.8% for the S&P 500.

During that time, this U.S. mid-cap equity index outpaced its large-cap brethren nearly two out of every three years. Yet mid-cap stocks have fallen out of favor in the recent past, as the MC 400 beat the 500 in only one of the last five years.

Contrarian investors might now be wondering if the possibility of “reversion to the mean” awaits them in 2019.

We think it does, based on the improvement in relative price performance, EPS growth expectations and relative multiple.