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The Goldilocks of Investing: 3 Medium-Cap Stocks Poised for Growth

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Medium-cap stocks, as the title of my article states, are indeed the “Goldilocks” of equities. That’s because small-cap stocks are prone to bankruptcies and thesis-shattering events, such as products that malfunction and new, ruinous competitors. Meanwhile, in many cases, it’s difficult if not impossible for large-cap stock to generate enough revenue to generate huge returns for investors. Conversely, mid-cap stocks are unlikely to go bankrupt or encounter other disasters, but it’s relatively easy for them to raise their top and bottom lines a great deal.

As a result, mid-cap stocks can indeed soar tremendously. For the purposes of this column, I’m defining mid-cap stocks as those with market capitalizations of $1 billion to $10 billion. Here are three top-notch mid-cap stocks that long-term growth investors should consider buying.

GitLab (GTLB)

The GitLab (GTLB) logo on an iPhone screen.

Source: Lori Butcher / Shutterstock.com

According to Investor’s Business Daily, GitLab (NASDAQ:GTLB) “helps customers develop software and deploy new applications in a secure process.” Among the specific tasks that it enables are “the automation of code” and speeding the development of software. The firm is extensively incorporating AI into its solutions.

Among GitLab’s key assets are its close partnerships with both Alphabet’s (NASDAQ:GOOG,NASDAQ:GOOGL) Google Cloud and Amazon’s (NASDAQ:AMZN) cloud unit, AWS. Moreover, Alphabet, showing its faith in GTLB, has acquired a 2.5% stake in the company.

And according to the highly respected tech research firm. Gartner, GTLB is the best company in its sector when it comes to the “Ability to Execute” and the second-best in “Completeness of Vision.”

Last quarter, GitLab’s top line soared 32% versus the same quarter a year earlier, while its gross margin, excluding certain items, came in at an incredibly high 91%.

The market capitalization of GTLB is $9.7 billion.

MakeMyTrip (MMYT)

Plane travel. Man standing in airport waiting for flight. travel stocks to buy

Source: Olena Yakobchuk / Shutterstock

India-based online travel agency MakeMyTrip (NASDAQ:MMYT) is benefiting from the very rapid growth of the Indian economy. Last month, Goldman Sachs predicted that the South Asian country’s economy would expand 6.3% in its fiscal year that ends in March 2024.

In MMYT’s fiscal second quarter that ended in October, the company’s revenue jumped 28.5% to $168.7 million, while its net profit, excluding certain items, more than tripled year-over-year to $27.8 million.

“Our innovative travel solutions, brand strength and ability to deliver
superior value to our customers and our partners are helping us to drive profitable growth,” CEO Rajesh Magow said in a statement.

And citing the very well-respected consulting firm, McKinsey, Magow reported that Indians’ expenditures on travel are expected to soar to $410 billion in 2030 from $150 billion in 2019.

The CEO noted that MMYT is benefiting from adding many more hotels to its website and the recovery of the number of international flights beyond “pre-pandemic levels for the first time.”

The company’s rapid growth and ability to benefit from India’s strong economic growth make it one of the best medium-cap stocks to buy.

MMYT stock has a market capitalization of $5 billion.

Luckin Coffee (LKNCY)

close up luckin coffee's logo coffee brand in Shanghai, June 2019.

Source: NewsToday / Shutterstock.com

According to Seeking Alpha columnist Pinnancle Investment Analysis, Luckin (OTC:LKNCY) now has a higher market share than Starbucks (NASDAQ:SBUX) in China, representing a very impressive feat.

L:uckin has surpassed SBUX by offering cheaper coffee than its American rival while emphasizing quick, convenient service. Additionally, Luckin has introduced drinks that incorporate liquids which are already popular in China, such as coconut juice and Moutai, a spirit alcohol that’s well-loved in the Asian country. Finally, Luckin has rapidly built new stores in China. As of June, it had 10,000 outlets in China, versus 6,480 for Starbucks.

Using these techniques, Luckin is growing incredibly rapidly, as its top line jumped to $1.93 billion in 2022 from $1.25 billion in 2021. Last quarter, its top line soared 85% versus the same year earlier to $867 million. The firm has no need to rely on opening new stores for all of its growth, as its same-store sales climbed a very robust 20% in Q3. Furthermore, Luckin is very profitable as its generated 131.l8 million of operating income in Q3.

Due to overdone fears about a drop in the company’s margins and exaggerated worries about the Chinese economy, the shares fell 13.6% in the three months that ended on Dec. 15. As a result, they have a price-earnings ratio of 23.85 which is quite low given the company’s rapid growth.

The market capitalization of LKNCY stock is $7.66 billion.

On the date of publication, Larry Ramer’s wife held a long position in LKNCY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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