Most of the financial news you see is about the big companies. Why? Because they're the big news makers. Big projects, big acquisitions, big budgets.
But big returns can come from mid-cap stocks, too. These mid-sized companies have developed a successful business model, yet still have a lot of room for growth.
Would you expect a giant like BHP Billiton Limited (ASX: BHP) with a market capitalisation of $91 billion to double over the next year or even two? Not really.
However, a fast growing mid-cap stock could turn into a one, two or even five-bagger (a number of times the original share price) quicker than you think. That's why you want to keep the good ones on your watchlist and the best ones in your portfolio.
Here are two mid-caps that have very good growth potential over the next several years.
— Electronic gaming machine maker Aristocrat Leisure Limited (ASX: ALL) has already established itself as the market leader in Australia and the Asian region for slot machines, pokies machines and video gaming.
On top of that, the company is expanding its US gaming market business through acquisitions. Online social gaming is another area of development Aristocrat Leisure is growing into. The games are free, but players can buy things and features for the games with real money.
The next several years may see earnings grow as much as 19% annually. New casino markets could open in countries like Japan and South Korea in the near future, so Aristocrat Leisure may have more opportunities to boost Asian sales.
— Cochlear Limited (ASX: COH) is a clear market leader in the cochlear implant hearing device business with a strong brand name. It controls about 60% of the market share in the US and has extensive business in Europe and the Middle East as well.
The stock is up 36% in the past twelve months because newly released products are driving sales. Yet that is just the beginning of the new product cycle business and the company is looking towards further product approvals in financial year 2015. New products in the US market will soon be released in overseas markets, keeping revenue growth strong.
Analysts are forecasting earnings growth of about 35% annually over the next two years. The stock is trading at 37 times earnings, which is not too expensive for the expected growth. Cochlear is a solid, growing company in a number of international markets. I'd add this one to your portfolio.
