2014 has been an exceptional year for investors in Australia’s best performing mid-cap stocks. Unlike their larger cap (or capitalisation) brothers, mid-cap stocks are generally considered more risky as they have less certain growth prospects and traditionally are more prone to surprising the market with downgrades.
While some surprise on the downside, the great thing about mid-cap stocks is that fewer brokers cover the stocks and therefore they also have the ability to surprise on the upside.
This has been the case for three of the best-performing mid-caps this year. The very best performing mid-cap has been Liquefied Natural Gas Limited (ASX: LNG). LNG shares are up 625% in 2014, meaning that for every $1,000 invested at January 1, you would now have $6,250! The company is developing an LNG export plant in the U.S. that will export gas at a lower price than international rivals due to its proprietary technology. It will be a long-term play but could be huge for investors.
The remaining two mid-cap stocks haven’t delivered anywhere near the type of return that LNG has, but are more developed companies with relatively stable outlooks.
G8 Education Ltd (ASX: GEM) has returned over 46% this year as it continues to consolidate Australia’s fragmented childcare industry. The catalyst has been the big purchase of a relatively large rival, as well as the development of an overseas debt facility to help fund future growth. G8 has a great outlook and is expected to continue growing strongly for years to come.
Finally, Fairfax Media Limited (ASX: FXJ) has been successful in selling its turnaround story to investors in 2014. Fairfax has made a point of cutting costs through staff redundancies, consolidating groups, and streamlining operations to profit in the current media landscape. The company is focussing heavily on its Domain real estate listing website and improving its digital content offering, at the expense of the underperforming hard-copy newspaper and tabloid businesses. Overall, Fairfax has a long way to go and needs to keep making changes to keep up with the changing media industry.
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Returns as of 6th October 2020
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