Are There Stocks To Park Your Money In? Actionable Ideas In Mid-Cap Growth Names
Piper Sandler's Craig Johnson CFA CMT, joined us on Premarket Prep to talk actionable ideas in mid-cap growth names amid the uncertainty surrounding mega cap tech.
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00:00Is there a place just to sit on the sidelines and maybe sit it out for a bit?
00:03I mean, especially if you're in the indices because if you think the generals are going lower the S&P is going down
00:09I mean, there's no doubt because it's 40 50 percent generals really at the top of it when you really look at what you know
00:15Make it makes up the S&P
00:17So if you think you know
00:19We are gonna continue to go lower on the generals
00:22You just move cash to the sidelines if you don't want to play the small stuff
00:25So what I think is so let me answer that question specifically, but I'm gonna answer it say this first as
00:31This sort of rotation takes place. It's gonna be choppy. It's going to be choppy
00:36We saw that in 2012 and 2013
00:39And this is where it's like the generals kind of get pushed down you push your mid small caps up and then you kind of
00:45Reverse it you kind of keep coming back. It's gonna be an interesting trading environment from that perspective
00:50Do we have to see this market completely implode?
00:53I don't think you really do because this is where your average stock can start to pick up. It's not going to be perfect
01:00Yes, no question. The generals are 30 plus percent of the entire market
01:05No doubt about it, but they're not all going to go down at the same pace
01:09It's not going to be one for one of those things happening
01:11Like we've already seen the Tesla already correct, right?
01:15And therefore we'll see other things sort of pick up and offset that to a degree
01:21But here's the thing is in my world I can't just sit on the sidelines
01:25I got to think about something else to go do that's where I come back with ice or you know
01:30Some of those kind of names names that I called out on our you know, institutional call it just a few moments ago
01:36I'll give you a list of these right
01:40Things that I called out for actionable ideas in mid cap land 20% top line 20% bottom line growth
01:47take a look at a
01:49LLKT
01:50Okay, this is stock is breaking out of a base. Take a look at granted construction
01:56take a look at
01:58It's gonna benefit from an interest rate cut to it will definitely benefit from that. Also, there's a symbol on that one. Yeah
02:06GBA
02:07Also, take a look at provident financial services. I mean, this is an interesting down
02:13downtrend reversal first improvement in the relative strength, you know in a long time
02:17And by the way, if people like these charts should be an email Craig that Johnson at PSE calm
02:24I send these out for free on the weekends if you want to see them
02:28They're not marked up, but it's entire books of the market also look at PLM are what a great
02:35sideways consolidation
02:37For two and a half years and we're just starting to break out
02:40There's definitely things to do in this market stepstone group
02:44Also, look at this one's already had a pretty good move look at
02:50Take a look at clear secure. I mean interesting downtrend reversal small cap company
02:56Again with about a 2.7 billion market cap
03:00Doesn't just have to be about the generals
03:02There's a lot of other things that we can definitely go out and look at
03:05What are how are the valuations on these things because of the one thing that keeps me, you know?
03:09And I'm a trader on my day job
03:10But I'm a long-term investor and I've always been a value type of guy and the reason that I've sold my Apple and sold
03:16My Microsoft and sold most of my NVIDIA is I just can't stomach paying 34 35 times earnings for these stocks
03:23I just feel like I'm paying too much for those earnings when these things were trading
03:272627 last year and you know and and if I go back to Apple seven eight years ago was trading 13 14 times earnings
03:34I feel like it's a valuation issue here more than anything. How are these valuations on these mid-cap stocks?
03:40Well, let's talk about that right because that's a great question. So if I look at the
03:44SML which is the S&P 600, okay right now on
03:482025 earnings and again
03:50This is now that we're basically through second quarter earnings
03:54We got to start thinking about 2025 numbers, right?
03:56Because we're already in the third quarter and you're thinking about 12 months ahead
03:59What if I told you Dennis that I'm 2025 earnings you're trading at fourteen point two times
04:06Okay, and if you're looking at what is the growth rate year-over-year because 24 earnings are pretty weak
04:11You're talking about twenty four point four eight percent growth twenty five over twenty four at fourteen point two times
04:18If I go all the way back to the to the mid 90s
04:21I can tell you that the median multiple is twenty two point eight
04:25You're trading at a discount as you go down to the six hundred
04:29Excuse me as you go down to the six hundred and if we look at the mid cap
04:33one here to
04:35You can see that in terms of mid cap if I can get there. Here we go
04:39If I look at the mid cap side of the world
04:43You're trading at fourteen point seven times twenty five and you're looking at a growth rate. That's about eighteen point eight nine now
04:51Again, you're trading at a discount to the longer term multiple that you've had which is nineteen point eight
04:57So again compare and contrast that Dennis with the large cap guys, which right now
05:03We get to the top of the sheet, this is great
05:05I love this crunching data
05:06But you know you're trading at nineteen point three times the median post-world war two is sixteen and a half
05:12And you're looking at a growth rate. That's fifteen point zero two
05:15You've got better valuation better growth down cap than you do in the five hundred at this point in time Dennis