When you think of making remarkable stock gains, you are more likely to get the biggest share price moves from smaller companies.
We all want to beat the market return, yet if you only stick with the big name stocks, you might be missing out on returns well above the average.
Mid-cap stocks give investors a better balance of stability and growth than small-caps. Their business models have been tried and tested and the successful ones keep going up.
Rather than chase just the large-caps, here are two mid-cap stocks that are making a name for themselves with positive growth.
The software developer Technology One Limited (ASX: TNE) provides enterprise platforms for HR, payroll, supply chain and business intelligence to companies and government organisations. The stock has made a remarkable run, up from about $1 in early 2012 to $3.35 now.
It was added to the S&P/ASX 200 Index (ASX: XJO) (Index: ^AXJO) in September and offers a 1.8% partially franked yield. The company is developing its successful software suite Ci for cloud applications, called Ci Anywhere. It should have the last development step, consulting in the cloud, complete by the end of 2014.
It has rising net profits coming from the steady growth of its initial and annual software licencing fees, up 24% and 13% respectively in first half of FY 2014. It's financially solid with very low debt and a cash position of about $54 million. It is expanding into the UK and the cloud Ci Anywhere could give it a great chance to grow into other new regions as well.
Sirtex Medical Limited (ASX: SRX), the maker of a specialised liver cancer treatment is another great example of a mid-cap roaring to the forefront. It gets the great majority of its revenue from its North American business, the world's largest healthcare market.
The treatment products have already been a success with a rising earnings over the past five years. The results of a clinical trial due out in 2015 may find that its SIR-Spheres product should be used more prevalently for cancer patients. If that is the case, then the company projects production will likely triple to cover the expected greater demand and usage.
Already, investors have driven up the price in anticipation to almost $26 a share, with a staggering 53 price-earnings ratio. Consensus forecasts have earnings growing an average 44% annually for the next two years, however that would be based on a positive trial result. Nonetheless, the company is beginning to prepare for possible production expansion.
I like the company's story, but the PE ratio is prohibitively high. The stock could sell off quickly if investors are disappointed or take quick profits. I would say to be careful with this one and possibly wait for a lower entry price.
