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Why mid-cap stocks are a hidden gem for active investors
Yahoo Financeยท2025-06-11 16:40

Midcap Investment Opportunity - Midcaps offer a blend of discovery value similar to small caps and financial quality/liquidity akin to large caps, making them fertile ground for active management [2] - Investors are typically underallocated in the midcap space [3] - Alger favors companies with strong balance sheets and cash flow generating capabilities to fund their own growth [4] RBC Bearings (RBC) Analysis - Alger invested in RBC Bearings (RBC) since 2020, viewing it as an exceptional company with the potential to become a large company [5] - RBC is a market leader in highly engineered precision bearings for commercial aerospace, defense, and industrial markets [5] - RBC's bearings are mission-critical, highly regulated, and essential for manufacturing operations, reducing wear and tear, energy loss, and facilitating power transmission [6] - The majority of RBC's products are sole-sourced, providing a strong competitive moat [6] - RBC has idiosyncratic drivers and pricing power, making it resilient to inflation and recession concerns [6] - Commercial aerospace is RBC's fastest-growing segment, expected to benefit from a multi-year cyclical recovery [6] - The commercial aerospace industry experienced a steep downturn in 2020 and 2021 due to COVID travel restrictions and the grounding of Boeing 737 Max, but these issues are now resolved [7] Tariff Policy and Competitive Advantage - Focus on companies like RBC Bearings that can control their own destiny due to differentiated products and pricing power [8] - Companies with differentiated products can pass tariff costs to customers because their products are mission-critical [8] - Alger focuses on companies with strong competitive advantages and pricing power [8]