Wall Street is reeling under severe volatility as the Russia-Ukraine conflict has shown no sign of an amicable solution even after two weeks. The IMF has warned of a significant negative impact of the ongoing geopolitical conflict on global economic growth. Moreover, market participants are uncertain about the Fed’s policy toward interest rate amid the war and mounting inflation.
Despite these uncertainties, several mid-cap (market capital > $1 billion < $10 billion) stocks have surged year to date. Investment in those stocks with a favorable Zacks Rank and strong growth potential will be fruitful going forward. Five of them are —
Cabot Corp. ( CBT Quick Quote CBT - Free Report) , DT Midstream Inc. ( DTM Quick Quote DTM - Free Report) , Huntington Ingalls Industries Inc. ( HII Quick Quote HII - Free Report) , Helmerich & Payne Inc. ( HP Quick Quote HP - Free Report) and New Jersey Resources Corp. ( NJR Quick Quote NJR - Free Report) . Inflation Likely to Rise
The inflation level is currently at 40-year high in the United States. The major impact so far of the Russian invasion in Ukraine is that commodity prices have skyrocketed. The first among these is crude oil. As the U.S. government has stopped importing Russian oil, a major source of global energy, the U.S. benchmark — WTI crude — topped $125 per barrel, the highest since July 2008. The global benchmark — Brent crude — climbed $130 per barrel, the highest since July 2008. Gasoline price is expected to hit $5 gallon very soon.
Other commodity prices like aluminum, nickel, zinc and palladium are at their all-time highs as Russia is a major exporter of these metals. Steel and coal prices have also started elevating. Wheat prices have soared as Ukraine is known as the “wheat bowl” of Europe. All these will further aggravate inflation globally. Importance of Mid-Cap Stocks
Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked mid-cap stocks have a high potential to enhance their profitability, productivity and market share and may become large-caps in due course of time.
If the economic recovery slows down due to any unforeseen internal or external disturbances, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure.
On the other hand, if the crisis doesn’t worsen , these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to the capital markets.
Our Top Picks
We have narrowed our search to five mid-cap stocks with strong growth potential for 2022. These companies are regular dividend payers, which will act as an income stream during a market downturn. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see
. the complete list of today’s Zacks #1 Rank stocks here
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research Cabot has expanded its global footprint in black masterbatch and compounds. CBT will also gain from its strategic acquisitions. The NSCC Carbon black plant acquisition will support its growth objectives and broaden its capabilities. The buyout of Shenzhen Sanshun has also expanded Cabot’s capabilities in the high-growth batteries market and strengthened its global leadership position in carbon additives. The Tokai Carbon buyout will also boost CBT’s Battery Materials product line. Cabot also remains committed to return cash to its shareholders leveraging healthy cash flows. The Zacks Rank #1 Cabot has an expected earnings growth rate of 15.5% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 7.8% over the last 60 days. The stock price has jumped 22.4% year to date. CBT has a current dividend yield of 2.18%. DT Midstream is an owner, operator and developer of natural gas interstate and intrastate pipelines; storage and gathering systems and compression, treatment and surface facilities in the United States. DTM operates through two segments, Pipeline and Gathering.
The Zacks Rank #2 DT Midstream has an expected earnings growth rate of 9.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days. The stock price has climbed 18% year to date. DTM has a current dividend yield of 4.28%.
Huntington Ingalls is the prime industrial employer in Virginia and the sole manufacturer of nuclear-powered aircraft carriers in the United States. Over 70% of the active U.S. Navy fleet consists of HII’s ships.
Moreover, Huntington Ingalls’ significant backlog indicates solid revenue growth prospects. HII has a strong solvency position in the near term. Any increase in defense budget spending bodes well for Huntington Ingalls as it may increase demand for its products.
The Zacks Rank #2 HII has an expected earnings growth rate of 14.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the last 30 days. The stock price has surged 12.2% year to date. Huntington Ingalls has a current dividend yield of 2.16%.
Helmerich & Payne is engaged in the contract drilling of oil and gas wells in the United States and internationally. HP’s technologically-advanced FlexRigs are much in demand and it has already upgraded most of its drilling feet with the latest technology.
Customer acceptance of Helmerich & Payne's digitization efforts has led to cost reduction, improvement in efficiency and higher profits. HP’s low debt levels, both on an absolute and relative basis, are its positives.
The Zacks Rank #2 Helmerich & Payne has an expected earnings growth rate of 68.9% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 11% over the last 30 days. The stock price has soared 77.3% year to date. HP has a current dividend yield of 2.38%.
New Jersey Resources is an energy services holding company that provides safe and reliable natural gas and clean energy services, including transportation, distribution, asset management and home services. NJR operates through four segments: Natural Gas Distribution, Clean Energy Ventures, Energy Services, and Storage and Transportation.
The Zacks Rank #2 New Jersey Resources has an expected earnings growth rate of 5.6% for the current year (ending September 2022). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 7 days. The stock price has advanced 11.1% year to date. NJR has a current dividend yield of 3.19%.