- Investors should typically be exposed to mid-cap stocks in order to balance their investment portfolios.
- Fletcher Building is on a steady financial foot and seeks to grow via its tried-and-true methods of innovation and digitisation of customer services.
- Infratil smart investments in renewable energy and technology companies are paying off and they are experiencing a growth spurt of which mid-cap companies dream.
- Vector would attempt to accelerate its normally moderate growth by digitalisation of the devices, which monitor its field assets in order to improve its operational capacity.
Small, medium, and large caps. These labels categorise companies in terms of their market valuation. ‘Cap’ refers to capitalisation (or market capitalisation), which is a fancy word for saying how much a market values a company. The value is determined by the number of shares multiplied by each share’s value.
Mid and small-cap companies are typically grouped together in NZ as the large-cap companies are more like the US and European mid-cap companies in terms of valuation.
The valuation of a NZX mid-cap company is somewhere in the top half of the NZ$2 billion to NZ$10 billion range. These companies provide balance to a portfolio as they not only have a steady financial footing but also have the potential for moderate to good long-term growth.
An investor will typically have exposure to all three types of capitalisation in order to spread their risk and maximise opportunities.
Let’s take a peek at some of the NZX-listed mid-cap stocks.
Fletcher Building Limited
Fletcher Building Limited (NZX:FBU) had 824 million issued shares each worth NZ$6.20 as on 19 January 2021. FBU was listed 25 years ago on the NZX. The value of the company has increased 400+ %, from NZ$1 billion at the start of the year 2000 to the current valuation of NZ$4.71 billion.
Much like the rest of the market, the movement of the FBU share price for the past year has been a roller-coaster ride. The share price has increased 13.6% since this time last year, but only after falling 43% in March 2020. The recent rise in the share price is in part due to the better-than-expected earnings in the second half of 2020 as well as favourable earning guidance for the first half of 2021.
Moving forward, long-term growth will be driven by product innovation and digitisations of customer services, all aided by a strong cash flow and balance sheet (net debt $388 million, liquidity $1.4 billion as of 31 October 2020).
On 19 January 2021, by the end of the market session, Fletcher Building was at NZ$5.74, rising by 0.88% from its last close. The Company’s market capitalisation stood at NZ$4.71 billion.
Infratil Limited (NZX:IFT) had 723 million issued shares each worth NZ$7.14 as on 19 January 2021. IFT was listed on the NZX in 1994. The value of Infratil has increased 16.6% per year since its 1994 listing on the NZX. The value of the company currently stands at NZ$5.1 billion.
IFT’s share price followed the same trajectory as Fletcher’s last year and dipped 43% in March. Where it deviates from FBU is how good a rebound the share price has had.
IFT’s share price is 34.5% higher now than where it stood 52 weeks ago. The extraordinary rebound can be attributed to Infratil’s investment in companies working in renewable energy and digital space. CDC Data Centres and Tilt Renewables (NZX:TLT) are of a particular note, increasing in value over the past year by 400 million and 1 billion, respectively. Infratil’s growth is very promising and could one day pass the large-cap-valuation threshold.
On 19 January 2021, by the end of the trading session Infratil was at NZ$7.22, down by 0.41% from its last close. The Company’s market capitalisation stood at NZ$2.19 billion.
Vector Limited (NZX:VCT) had 1 billion issued shares each worth NZ$4.38 as on 19 January 2021 and has a market capitalisation of NZ$4.38 billion . Vector was listed on the NZX in 2005 and has since climbed 82.5% from a ~2.4 billion valuation at that time.
Vector shares are up 16.4% since this time last year (on 19 January 2020) after rebounding from the obligatory March 2020 drop, which also affected FBU and IFT.
VCT is a steady grower with consistent moderate performance increases year on year. Pressing ahead, VCT hope to accelerate growth via investment in cloud-based platforms, which seek to economise and expediate the processes involved with smart meters and other energy network assets.
On 19 January 2021, by the end of the market session, Vector was at NZ$4.39, up by 1.15% from its last close.