Megacompanies valued in the hundreds of billions of dollars get most of the attention from investors. But there are plenty of opportunities among smaller, mid-cap companies worth between $2 billion and $10 billion. According to three of our Motley Fool contributors, First Solar (NASDAQ:FSLR), Oaktree Capital (NYSE:OAK), and Goldcorp (NYSE:GG) top the list. Here’s what you need to know about these three mid-cap stocks.
Great management team, cheap stock
Tyler Crowe (First Solar): For all the potential that solar power has as a growth industry, it is an absolutely brutal business that has led to numerous bankruptcies and investor capital going up in smoke. The rapid development of technology means that panels becomes quickly commoditized and it’s extremely difficult for companies to exert pricing power. Also, the industry is much more cyclical than most investors think. Even though the industry as a whole continues to put up gaudy growth rates, it habitually goes through periods of over- and under-capacity that lead to wild swings in panel prices.
To navigate this volatile industry, it takes an exceptional management team. That, more than anything else, is what makes First Solar one of the best investments in this business. First Solar’s management has been able to consistently generate free cash flow despite not always having the most efficient or cheapest panels on the market.
What’s surprising is that despite this steady hand in a volatile market and a massive cash war chest, Wall Street has bid this company’s stock down based on lower panel prices and fears that solar panel import tariffs will go away over time. The stock is so cheap right now that cash and short-term investments make up 62% of First Solar’s market capitalization.
Yes, First Solar’s stock will rise and fall with the industry’s prospects, and the cyclical nature of the business means that you need to be very price conscious when buying a stock in this industry. That said, First Solar’s management has shown…
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