How I’d invest $10,000 in mid caps today

The share market has taken a dive in recent weeks, with many quality shares now at more attractive prices.

Has the value of the underlying businesses dropped by 5% or 10% because of recent events? I don’t think so. Most businesses are just better value and it’s better to buy things when they’re cheaper rather than why they’re expensive, obviously.

The mid-cap part of the share market is a great hunting ground because quite often these businesses are the leaders in their industry yet are small enough to have good growth potential.

If I had $10,000 to invest today, these are the mid-caps I’d pick:

InvoCare Limited (ASX: IVC) – $2,500

InvoCare is the leading funeral operator in Australia and New Zealand. Death is sadly inevitable which means InvoCare has almost guaranteed revenue and profit each year, it has very defensive earnings.

It could be a good growth story because death volumes are expected to grow by 1.4% per annum between 2016 to 2025 and then increase by 2.2% per annum from 2025 to 2050 due to Australia’s ageing population.

BWX Limited (ASX: BWX) – $2,500

BWX is the leading natural beauty cosmetic company in Australia with its Sukin range of products, as well as the American brands it recently acquired like Mineral Fusion.

The share price has dropped significantly in recent weeks due to the market being disappointed with its half-year result. Perhaps the company was suffering from acquisition indigestion but if it delivers on its promising international growth plans, particularly in the US, BWX could be a good long-term growth pick.

Greencross Limited (ASX: GXL) – $3,000

Greencross operates the Greencross vet and Petbarn chain. I think it’s a good pick because its co-location strategy of putting a vet inside a Petbarn should boost revenue through cross-selling whilst also saving on costs.

The share price has been hurt in recent weeks with worries about Amazon damaging the margins of the retail segment of Greencross’ business, but I think the current value of 14x FY18’s estimated earnings is an attractive price for a growing business.

MNF Group Ltd (ASX: MNF) – $2,000

MNF is Australia’s leading Voice over Internet Protocol provider. The company has grown at a very impressive rate and is now expanding overseas too, it’s one of the few international companies to go international and do it well.

Management are predicting further growth in FY18 and beyond, particularly if the launch of the Pennytel brand boosts profit in the medium-term.

Foolish takeaway

I’m a fan of all four businesses, that’s why I’m already a shareholder in three of them. If I had to pick one to top up my holding I’d pick InvoCare because it’s now trading with a grossed-up yield of over 5% and is at the lowest price/earnings ratio it has been for quite a while.

An even better mid-cap option than the above four could be this top growth stock, I’m a fan and it’s already in my portfolio.

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Motley Fool contributor Tristan Harrison owns shares of BWX Limited, Greencross Limited, and InvoCare Limited. The Motley Fool Australia owns shares of and has recommended BWX Limited, Greencross Limited, and MNF Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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