By Ian Salisbury

In a stock market struggling to find its footing, consider sticking with the middle ground.

Mid-cap stocks aren't the biggest names -- investors don't obsess over them like Apple or Nvidia. Nor do they offer small-caps' promise of undiscovered gems. But with megacaps and small-caps both exhibiting weakness this year, the middle kids might be in a prime spot.

On the megacap side, high-growth companies like Nvidia and the rest of the Magnificent Seven are no longer leading the market and, in Tesla's case, have fallen hard. Economically sensitive small-caps are under pressure for a different reason: Investors fear an economic slowdown triggered by President Donald Trump's tariffs, hitting small-cap earnings.

Mid-caps wouldn't be unscathed in a downturn, but they do look relatively cheap. The Russell Midcap Index changes hands at 15 times forward earnings, against 21 times for the Russell 1000 large-cap index. The mid-cap index also looks inexpensive at a forward price/sales ratio of 1.6, compared with 2.7 for the Russell 1000.

What matters now, of course, is profit growth. Analysts expect mid-cap earnings per share to increase 9.5% for 2025, compared with 11.6% for large-caps. But that should shift in 2026, with mid-cap profits forecast to rise nearly 16%, two percentage points better than large-caps.

There's also a big helping of industrial and material stocks in the mid-cap space, at around a quarter of major indexes. Trump's policies to boost domestic manufacturing and erect trade barriers could help protect their earnings.

"If you believe in Trump when it comes to reshoring, all those facilities will have to be built here," says Brandon Geisler, portfolio co-manager of the Alger Mid Cap Growth fund.

Historically, mid-caps have had some good runs. While larger-cap indexes have vaulted ahead in recent years, thanks in good measure to the Magnificent Seven, the Russell Midcap index edged the S&P 500 from 2009 to 2020. Going back to 1991, the mid-cap index has returned an annualized 11% year, compared with 10.5% for the S&P 500.

There's no hard rule separating mid-caps from the rest of the market. S&P Dow Jones Indices, whose MidCap 400 targets the largest 400 companies after those in the S&P 500 index, uses a $7 billion to $20 billion range. Russell goes from $2 billion to $50 billion.

The wide berth leaves plenty to choose from -- including storied names that have fallen on hard times, up-and-comers potentially on their way to becoming large-caps, and steady earners.

Here are five mid-caps to consider.

SharkNinja

Market Cap: $13 billion

SharkNinja is on a roll in household appliances, making innovative hit products like its Ninja SLUSHi machine and Crispi air fryer. The company launched 24 products last year -- including coolers, fans, and frozen-drink machines -- and plans to enter two categories a year in the future. Its new Ninja FlexFlame grill, which doubles as a smoker and pizza oven, could give Weber a run as the U.S. grilling season heats up.

Bolstered by a loyal fan base and a string of new products, sales are expected to grow 13% this year to $6.2 billion, according to consensus forecasts. The company is maintaining industry-leading gross margins at 49%. And its bottom line is rising, with earnings per share forecast to be up 13% this year to $4.96.

A 90% stock surge in 2024 has left the stock on the pricey side, fetching 18.6 times 2025 earnings of $2.92 a share. Rival Helen of Troy is far cheaper, as is France's SEB, owner of brands like Krups and All-Clad.

Tariffs could increase costs and dent margins for SharkNinja and others in the appliance space. But the company expects 90% of U.S. goods volume to be moved out of China by the end of the second quarter, and nearly all by the end of 2025. "Like everyone else, we are watching and waiting, " says CEO Mark Barrocas.

One other risk is that SharkNinja expands too fast, launching products that flame out after an initial burst of sales, says Derek Smashey, co-manager of the Carillon Scout Mid Cap fund. But Smashey likes the stock. "They've got a strong brand and they can build high-quality products cheaper than competitors," he says. "They've executed really well over the years."

There's also a runway for international expansion as the company pushes into Europe and other markets. Barrocas says international sales, currently a third of the total, can grow to 50% in the long run.

Jefferies analyst Randal Konik sees the stock hitting $175 over the next 12 months, assuming the company tops its own estimates for sales growth, reaching an annualized 17%. The company has a track record of beating its forecasts, he says. "We believe their guidance is likely conservative."

Blue Owl Capital

Market Cap: $33 billion

Private asset managers' moves into Main Street portfolios is one of the hottest topics on Wall Street. Blue Owl Capital is a way to bet on the trend -- without tying up your cash in an illiquid private fund.

Operating in the shadows of Blackstone and other larger firms, Blue Owl oversees $251 billion of assets, with about half in credit and the rest in real estate and investments through external asset managers. Blue Owl has also been highly acquisitive, buying other fund managers and assets, including a $1 billion deal in January for IPI Partners, a firm that leases data centers.

The deals and asset growth are lifting revenue at a 30% annualized clip, expected to hit $2.8 billion this year. They are also fueling 18% earnings growth, on tap to reach $0.92 a share in 2025, according to consensus forecasts. At its investor day in February, Blue Owl forecast annual 20% growth in fee revenue through 2029.

There are wrinkles to the story. One is a potential bubble in private assets with far too much capital chasing deals, pushing up multiples. Another worry is that President Donald Trump's trade policies will hit the economy, pushing down asset values and fee income.

Blue Owl co-CEO Marc Lipschultz argues the market is missing the firm's strengths. With its credit focus, it's less reliant on equity-based deals than private-equity firms, he says. "We would prefer a more active environment," he says, "but it doesn't have the direct bearing on our business that it does for many of our peers."

Blue Owl is also expanding in the wealth management channel, raising funds from investors with advisory accounts. About 50% of new money was from wealthy investors last year, and the firm is now building the business beyond North America. "We see a lot of prospects in Asia, the Middle East, and Europe," says co-CEO Doug Ostrover.

Investors in these funds tend to stick around, making fee income steadier or more predictable. "You're not losing money every year that you need to replace by selling more product," says Geisler, whose Alger Mid Cap Growth fund owns Blue Owl shares.

Evercore ISI analyst Glenn Schorr sees Blue Owl stock reaching $26, up from about $21 in recent trading, at a multiple of 27 times 2026 earnings. That would be a steep premium to rivals in the space averaging 20 times, but Schorr argues it's warranted by Blue Owl's faster growth, greater share of permanent capital and higher fee income.

Corning

Market Cap: $42 billion

Corning may be one of the few artificial-intelligence bets that isn't played out. The 174-year-old company specializes in glass products like screen for cellphones and TVs, telescope mirrors, and specialty goods like ceramic filters to reduce auto emissions. Lately, AI data centers have been stoking demand for its fiberoptics.

Corning has struggled as its electronics and fiber customers worked through large backlogs. Profits plunged nearly 20% in 2023, but snapped back last year. Thanks partly to data center spending, analysts now see profits growing 15% to 20% over the next two years.

"Corning has been perceived as a sleepy company," says Vincent DeAugustino, portfolio manager of the T. Rowe Price Mid-Cap Value fund, where Corning is the largest holding. But, he adds, AI is "a significant opportunity for them."

Optical communications is Corning's largest business, accounting for about a third of the company's $14 billion in revenue last year. The unit includes sales to phone carriers that use optical cable to support video and voice calls, and data centers where fiberoptics allow fast communication between AI chips.

Optical unit revenue leapt 51% in the fourth quarter. In August, Corning penned a deal to supply 10% of its global fiber capacity to Lumen Technologies, which should help fuel sales in 2025 and 2026.

Display technology isn't likely to deliver rapid growth, but sales have stabilized following a Covid-driven boom and bust. What's more, Corning has raised prices in recent quarters to offset increased materials costs, helping the unit earn profit margins of around 26% -- higher than competitors, says Deutsche Bank analyst Matt Niknam.

The display business "is more of a cash cow," says Niknam, who rates Corning a Buy, with a $56 price target. Niknam says the unit's operating income -- just over $1 billion in 2024 -- can be redeployed into growth areas like fiberoptics, or returned to shareholders.

While shares jumped 51% to $49 in the past 12 months, Corning still trades at a reasonable 21 times 2025 earnings. With profits expected to rise 19% this year, the stock has a price-to-earnings growth ratio of roughly 1.1, putting it in the value camp. Investors can also pick up income, with its dividend yield at 2.3%.

FTAI Aviation

Market Cap: $12 billion

The past few years have been brutal for Boeing, Airbus, and engine maker Pratt & Whitney, owned by RTX. Their struggles have been FTAI Aviation's gain.

Based in New York City, FTAI specializes in refurbishing and reselling engines, including the CFM56, one of the best-selling engines of all time. Revenue surged nearly fourfold over the past four years. Wall Street forecasts 36% sales growth for 2025, reaching $2.3 billion, with the company posting earnings of $4.87 a share, up from a loss of $0.32 a share in 2024.

FTAI's stock is controversial with investors. Shares were hammered in January by a Muddy Waters short-seller report that raised questions about its accounting. The Securities and Exchange Commission raised questions about its disclosures. The stock, which had been trading at more than $170, now goes for $117. But short interest remains an overhang, at 5.4% of shares outstanding.

FTAI CEO Joe Adams declined to comment on the accounting issues. In February, the company released an independent audit that found nothing amiss with its reporting. FTAI also said it had addressed the SEC's questions.

FTAI's core business should benefit from ongoing supply problems for new aircraft and engines. And the company still has a strong pitch to airlines, helping them save time and money by refurbishing modules, rather than overhauling entire engines. "It allows airlines to achieve huge maintenance savings," says Citi analyst Stephen Trent, a fan of the stock with a $190 target.

FTAI is also planning to manufacture more engine parts through a partnership with engineering company Chromalloy. FTAI said in January that the venture received regulatory approval for two of five parts, and that a third was close to approval. If Chromalloy can make all five parts, FTAI would save about $2 million every time it services an engine, Adams says. Assuming the firm services an average of 500 engines a year, that could help lift margins and trickle down to earnings.

One other catalyst for the stock could be a $4 billion "strategic capital initiative" that FTAI is developing. The venture plans to buy aircraft, while employing FTAI to handle their engine maintenance. The company offloaded 47 of its planes into the fund, and is lining up investors including Apollo Global Management and OneIM, a fund run by a co-founder of the SoftBank Vision Fund. The deal should add more engines to FTAI's maintenance pipeline, lifting profits, and it could grow into a larger business with OneIM's backing and investor relationships, says Benchmark analyst Josh Sullivan, who has a $300 target on the stock.

Wall Street analysts see plenty more gains, with an average target price of $188. The accounting controversy knocked FTAI's price/earnings ratio from 34 to 21 times 2025 earnings and 15 times 2026 estimates. Assuming no more accounting issues arise, the stock should get back to loftier levels.

Kenvue

Market Cap: $44 billion

Kenvue might not be a household name. But it's the corporate parent of big consumer health brands, including Tylenol, Band-Aid, and Neutrogena.

A 2023 spin-off from Johnson & Johnson, Kenvue has struggled on its own. The company cut 4% of its staff in a bid to trim $350 million in costs and streamline its operations last May. Meanwhile, its skin and beauty unit, which includes brands Neutrogena and Aveeno, has lost market share, leading to a string of revenue misses.

Kenvue now appears to be turning a corner, says T. Rowe's DeAugustino, whose fund owns the stock. "Some spins are more complicated than others, " he says. "In Kenvue's case, we believe this was a more complicated process than many appreciate. Much of this work is complete."

One positive is that an activist, Starboard Value, is pressuring Kenvue to lift sales. Three Starboard nominees are on its board, and the company is heeding some Starboard recommendations, including more marketing for its skin-care lineup. That may be paying off; Neutrogena in the fourth quarter had its highest level of recommendations by dermatologists in the past four years, a spokesman said.

While Kenvue's beauty business claws back, its other products are growing modestly. Sales for brands like Tylenol, Nicorette, and Zyrtec were up 1.9% in 2024. The division housing Listerine and Band-Aid grew an average 4.1%.

Granted, this is a sleepy company without much revenue growth and flat profits near term. But growth should pick up to a roughly 8% annualized pace starting in 2026. And at 20 times earnings, the stock trades at a discount to rivals like Procter & Gamble, at 23 times. Kenvue's 3.5% dividend yield also looks safe and is likely to keep rising as earnings get back on track.

Write to Ian Salisbury at ian.salisbury@barrons.com

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March 26, 2025 02:56 ET (06:56 GMT)

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