Grab These 5 Must-Own Mid-Cap Stocks in December

Factors such as the emergence of another infectious coronavirus variant, rising inflation, geopolitical tensions, supply chain constraints, and the Federal Reserve’s decision to taper its bond-buying soon are driving market volatility. The major benchmark indexes witnessed a sell-off last Friday, raising concerns about a potential market correction in the near term.

Against this backdrop, fundamentally sound mid-cap stocks could be ideal bets. Historically, mid-cap stocks have delivered better returns than large-cap stocks and remained more stable than small-cap stocks. With favorable policies encouraging domestic production, and with ongoing efforts to address supply chain issues acting as a support, mid-cap stocks should benefit this month and beyond.

Therefore, we think investors could consider betting on mid-cap stocks AerCap Holdings N.V. (AER), Jabil Inc. (JBL), Olin Corporation (OLN), AutoNation, Inc. (AN), and Penske Automotive Group, Inc. (PAG) now. Their fundamental strength, latest developments, and expanding market reach should help them dodge the market fluctuations and outperform the benchmark indexes.

AerCap Holdings N.V. (AER)

Headquartered in Dublin, Ireland, AER engages in the lease, financing, sale, and management of commercial aircraft and engines internationally. The company offers cash management, administrative, and aircraft asset management services and conducts lessee financial performance reviews. As of September 30, 2021, AerCap’s portfolio consisted of 1,304 owned, on-order, or managed aircraft. It had a market capitalization of $13.75 billion.

On November 2, 2021, AER signed a 20-year joint venture agreement with French-based aerospace engine manufacturer Safran Aircraft Engines regarding Shannon Engine Support (SES). SES is the leading provider of spare engines to CFM56 and LEAP operators. With similar expertise, common assets, and a complementary customer base to its wholly-owned engine leasing business, AER expects the SES business to be a great fit for its portfolio.

On November 1, 2021, AER acquired the GE Capital Aviation Services business from General Electric (GE), a multinational conglomerate that operates through Power, Renewable Energy, Aviation and Healthcare, and Capital segments. The acquisition positions AER as the worldwide industry leader across all areas of aviation leasing: aircraft, engines, and helicopters. As the demand for aircraft leasing accelerates, AER is looking forward to witnessing high sales in the coming months and serving a larger customer base.

For its fiscal third quarter, ended September 30, 2021, AER’s total revenues and other income increased 41.7% year-over-year to $1.45 billion. The company’s pre-tax income came in at $501.31 million, versus a $952.98 million loss in the prior-year period. AER’s net income came in at $433.92 million, versus an $849.93 million loss in the year-ago period. And its EPS was $3.35, compared to a $6.66 loss per share in the prior-year period. The company had $1.31 billion in cash and cash equivalents as of September 30, 2021.

Analysts expect the stock’s EPS to increase 23.8% year-over-year to $8.73 in the current year. A $5.06 billion consensus revenue estimate for the current year represents a 12.6% rise from the prior-year period. It surpassed the Street’s EPS estimates in three of the trailing four quarters.

The stock has gained 52.5% in price over the past year and 3.2% over the past three months. It closed yesterday’s trading session at $54.50.

AER’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth, Sentiment, Momentum, and Quality. Click here to see the additional ratings for AER’s Value and Stability. Of the 15 stocks in the A-rated Air Freight & Shipping Services industry, AER is ranked #1.

Jabil Inc. (JBL)

With a market cap of $8.56 billion, St. Petersburg, Fla.-based JBL provides electronic design and manufacturing services and solutions worldwide. The company provides systems assembly, regulatory compliance, reliability tests, direct-order fulfillment, and configure-to-order services. It serves 5G, wireless and cloud, digital print and retail, industrial and semi-cap, networking, and storage, automotive and transportation, connected devices, healthcare and packaging, and mobility industries.

On November 9, Badger Technologies, JBL’s product division specializing in retail automation, collaborated with TrackTik Software Inc., a cloud-based security workforce management software company, to deploy Badger PatrolBot autonomous robot and TrackTik software to automate manual security checks at the National Veterans Memorial and Museum (NVMM) in Ohio. Badger is looking to advance security and cost-effectively augment labor.

On October 26, 2021, JBL’s Badger Technologies launched a retail automation pilot program with Busy Beaver Building Centers, Inc., an operator of 24 full-line home improvement centers in Pennsylvania, which enables multipurpose autonomous robots to monitor on-shelf product availability and verify prices for more than 30,000 stock keeping units. The companies are looking forward to elevating customer shopping experiences with this pilot program.

For its fiscal fourth quarter, ended September 30, 2021, JBL’s net revenue increased 1.5% year-over-year to $7.41 billion. The company’s gross profit came in at $587 million, up 19.6% from its year-ago period. Its $314 million in non-GAAP operating income for the quarter indicates a 23.1% year-over-year improvement. JBL’s non-GAAP net income came in at $216 million, representing a 43.1% rise from the prior-year period. Its non-GAAP EPS increased 46.9% year-over-year $1.44. The company had $1.57 billion in cash and equivalents as of August 31, 2021.

A $6.36 consensus EPS estimate for the current year represents a 13.4% rise from the prior-year period. Analysts expect JBL’s revenue to improve 7.6% year-over-year to $31.52 billion for the current year. It surpassed the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow at a 12% rate per annum over the next five years.

JBL has gained 53% in price over the past year and lost 6.8% over the past three months. It ended yesterday’s trading session at $58.26.

It is no surprise that JBL has an overall A rating, which equates to Strong Buy in our POWR Ratings system.

The stock has a B grade for Value, Sentiment, and Quality. Click here to see the additional ratings for JBL’s Growth, Stability, and Momentum. JBL is ranked #2 of 75 stocks in the Technology - Services industry.

Olin Corporation (OLN)

OLN manufactures and distributes chemical products and ammunition internationally. The Clayton, Miss., company operates through three segments—Chlor Alkali Products and Vinyls; Epoxy; and Winchester. Its products are sold through its sales force, directly to various industrial customers, mass merchants, retailers, wholesalers, other distributors, and the U.S. Government and its prime contractors. It has a market capitalization of $8.25 billion.

On July 1, 2021, OLN agreed with ASHTA Chemicals, Inc. to purchase and sell the chlorine produced at ASHTA's Ashtabula, Ohio facility. This agreement provides the opportunity to optimize logistics across the OLN and ASHTA portfolio, reducing the number of miles chlorine travels to get to customers and overall transportation costs, while increasing the security and flexibility of supply within the growing OLN network. Both companies are looking forward to focusing on their strengths to serve their growing customer base.

OLN’s sales for its fiscal third quarter, ended September 30, 2021, increased 62.8% year-over-year to $2.34 billion. The company’s operating income came in at $549 million versus a $683.80 million loss in the prior-year period. OLN’s net income came in at $390.70 million, versus a $736.80 million loss in the prior-year period. Its EPS came in at $2.38, versus a $4.67 loss per share in the year-ago period. As of September 30, 2021, the company had $306.10 million in cash and cash equivalents.

Analysts expect the stock’s EPS to grow 868.5% year-over-year to $8.53 in the current year. A $8.81 billion consensus revenue estimate for the current year represents a 52.9% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a rate of 2.3% per annum over the next five years.

The stock has gained 148.3% in price over the past year and 7.6% over the past three months. It closed yesterday’s trading session at $51.77.

OLN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Momentum and a B grade for Growth, Value, Sentiment, and Quality. Click here to see the additional ratings for OLN’s Stability. OLN is ranked #13 of 90 stocks in the A-rated Chemicals industry.

Note that OLN is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

AutoNation, Inc. (AN)

With a market cap of $8.04 billion, Fort Lauderdale, Fla.-based AN operates as an automotive retailer that offers a range of new and used vehicles, wholesale parts, repair, maintenance, and collision services. The company also provides automotive finance and insurance products that comprise vehicle services and other protection products and arranges finance for vehicle purchases through third-party finance sources. As of December 31, 2020, it owned and operated 315 new vehicle franchises.

On November 16, 2021, AN opened AutoNation USA, its second pre-owned vehicle store in the Phoenix market. Driven by strong consumer demand for used vehicles, AutoNation USA is looking forward to delivering a distinctive customer-centric experience. The company expects to have 130 stores in operation from coast to coast by the end of 2026.

On October 18, AN opened its AutoNation USA store on Denver Broadway. By offering a “1Price Pre-Owned” program that features low, haggle-free pricing and a customer-centric process, AN is looking forward to leveraging the AutoNation brand, scale, and capturing a larger share of the used vehicle market.

AN’s total consolidated revenue for its fiscal third quarter, ended September 30, 2021, increased 18% year-over-year to $6.38 billion. The company’s non-GAAP gross profit came in at $1.27 billion, representing a 28.2% rise from the prior-year period. Its adjusted operating income was $503.30 million, up 63.3% from the prior-year period. AN’s non-GAAP net income came in at $361.7 million, indicating a 70.8% year-over-year improvement. And its non-GAAP EPS increased 115.1% year-over-year to $5.12. The company had $72 million in cash and cash equivalents as of September 30, 2021.

Analysts expect AN’s EPS to rise 144.7% year-over-year to $17.42 in the current year. A $25.77 billion consensus revenue estimate for the current year represents a 26.4% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. PEP’s EPS is expected to grow at a rate of 24.4% per annum over the next five years.

The stock has gained 102.1% in price over the past year and 12% over the past three months. It ended yesterday’s trading session at $122.67.

AN’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

AN has an A grade for Value and a B grade for Growth and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see AN’s Stability, Momentum, and Sentiment here. Of the 26 stocks in the B-rated Auto Dealers & Rentals industry, AN is ranked #4.

Note that AN is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.

Penske Automotive Group, Inc. (PAG)

PAG is a diversified transportation services company that is headquartered in Bloomfield Hills, Michigan and operates automotive and commercial truck dealerships internationally. The company sells new and used motor vehicles and related products, vehicle and collision repair services, finance and lease contracts, third-party insurance products, and other aftermarket products. It has a market capitalization of $7.80 billion.

On November 16, PAG acquired McCoy Freightliner, a retailer of medium- and heavy-duty commercial trucks in Oregon. This acquisition will add its two full-service dealerships and a remarketing center to PAG’s Premier Truck Group (PTG) subsidiary’s existing operations and expand its reach to the Pacific Northwest. PAG expects the move to generate approximately $200 million in annualized revenue.

On November 4, 2021, PAG opened its eighth U.S.-based CarShop location in Scottsdale, Ariz. The company is looking forward to offering a high-quality certified vehicle selection that undergoes rigorous inspection, competitive warranties, and an enjoyable shopping experience.

For its fiscal third quarter, ended September 30, 2021, PAG’s revenue increased 8.8% year-over-year to $6.50 billion. The company’s gross profit came in at $1.17 billion for the quarter, up 21.9% from the prior-year period. Its adjusted income from operations increased 52.7% year-over-year to $354.80 million. While its net income increased 44% year-over-year to $356.30 million, its adjusted EPS increased 53.8% to $4.46. As of September 30, 2021, the company had $119.20 million in cash and cash equivalents.

Analysts expect PAG’s EPS to improve 120.2% year-over-year to $14.84 in the current year. A $25.54 billion consensus revenue estimate for the current year represents a 24.9% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock’s EPS is expected to grow at a rate of 20% per annum over the next five years.

PAG’s stock has gained 73.4% in price over the past year and 11.1% over the past three months. It closed yesterday’s trading session at $99.60.

PAG’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Value and a B grade for Sentiment and Quality. Click here to see the additional ratings for PAG (Growth, Momentum, and Stability). PAG is ranked #3 in the Auto Dealers & Rentals industry.

AER shares were trading at $56.96 per share on Thursday morning, up $2.46 (+4.51%). Year-to-date, AER has gained 24.97%, versus a 23.31% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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