The Cube Midcap Report (Mon 3 June 2019) – Introduction/FAQ

The Cube Midcap Report (Mon 3 June 2019) – Introduction/FAQ

Good morning everyone,

Welcome to the Cube Midcap Report! This will be a semi-regular article discussing the latest mid-cap news.

There is nothing on the RNS for us today, so I’m taking this opportunity to give you an introduction to this report:

Introduction/FAQ

Why are you increasing your coverage of mid-caps?

The simple answer is because I like them!

The slightly longer answer is that they outperform other categories of stocks. A surprisingly large percentage of the mid-cap category consists of “quality” stocks – businesses with good economics and good growth prospects, which aren’t too risky. Mid-caps are in some ways the “Goldilocks” of the stock market.

What is a mid-cap, anyway?

There is no official definition of a mid-cap. We are going to use the simple rule that the market capitalisation has to be at least £500 million. We won’t have an upper bound, because we may occasionally wish to discuss large FTSE-100 companies (these would be considered mid-caps in a US/global context).

To help keep things tidy, we are going to put the Midcap Report in the FTSE-350 section of this website. As the name suggests, the FTSE-350 consists of the largest 350 companies by market capitalisation on the London Stock Exchange, which pass certain liquidity requirements. However, to keep you on your toes, we will also discuss FTSE Small-Cap components and AIM companies, so long as they pass our market cap rule.

To give you some context, as of last night there were only six members of the FTSE-350 Index which had a market cap of less than £500 million, and they are vulnerable to being removed and replaced by larger companies.

On the other hand, looking at AIM, it had 38 companies last night which had a market cap of more than £500 million. So we might analyse them, too (favourites like Nichols, IQE, Fevertree and ASOS).

But aren’t you a small-cap specialist?

That’s a tricky one. It’s true that I’ve done a lot of small-cap work publicly, but my professional background is actually in mid-caps. For several years, I managed institutional funds which had a mandate only to invest in FTSE-350 companies. And I have plenty of mid-caps and big-caps in my personal portfolio (BRBY, IGG, NXT, BATS, RMV, 888, BVIC, CCR).

In response to questions like these, I always insist that the industry or sector of a company is more important to me than its market cap. Rather than focusing on big or small companies, I just try to focus on companies which I might be able to understand! This leads us to the next question…

Which mid-caps will this report cover?

This is the most difficult question. Because of the nature of breaking news, it’s hard to predict what will be the best use of my time. There will be hectic news days, and quiet news days (like today).

I do know in advance that there are too many mid-caps for me to study them all, and that I’m not going to be able to study every sector.

My initial sector list is as follows.

  • Automobiles & Parts
  • Beverages
  • Electronic & Electrical Equipment
  • Financial Services
  • Food & Drug Retailers
  • Food Producers
  • General Industrials
  • General Retailers
  • Healthcare Equipment & Services
  • Household Goods & Home Construction
  • Leisure Goods
  • Life Insurance
  • Media
  • Nonlife Insurance
  • Personal Goods
  • Software & Computer Services
  • Support Services
  • Technology Hardware & Equipment
  • Tobacco
  • Travel & Leisure

This brings the number of shares in the universe below 250. While this is still too many for one person to analyse, I think it is a good structure for me to work with initially.

Please note that I hope other writers will contribute to this report in due course, too – and they will bring their own sector insights.

Finally, please let us know which shares you would like us to cover! Some of my best ideas have come from reader suggestions, and they are always very welcome.

So where do we go from here?

There is no news from our universe of shares today, and there is none scheduled tomorrow. So I might use tomorrow’s report as a chance to illustrate some of the tangible attractions of the mid-cap space.

On Wednesday, we have news scheduled from:

  • AO World (AO) – preliminary results
  • Biffa (BIGG) – preliminary results
  • GB Group (GBG) – preliminary results

There will be AGMs at Advanced Medical Solutions (AMS), Applegreen (APGN), Card Factory (CARD), Funding Circle (FCH), GVC (GVC) and Learning Technologies (LTG).

That’s all for today, see you again tomorrow!

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COMMENTS

Wordpress (13)
  • comment-avatar

    Tx Graham. A good intro imo. Cheers

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  • comment-avatar

    Sets out the store nicely. This is definitely an under-covered area for PI’s.

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  • comment-avatar

    Appreciate the feedback guys. See you tomorrow. G

  • comment-avatar

    looking forward to some enlightening coverage of stocks with profitability , growth prospects and a sound balance sheet . Things hard to find on AIM in the main .

  • comment-avatar
    DeSanj 5 months

    Thanks Graham
    this sounds great! 
    If you can please could you cover
    Kier
    Avon Rubber 
    Gocomrpare.com

    Thank you very much !

    • comment-avatar

      Hi DeSanj, I’m sorry but none of them are currently larger than £500 million!

  • comment-avatar

    Sounds great, Graham. Games Workshop is a share I’d appreciate you covering. Thank you!

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  • comment-avatar

    Thanks Graham.
    Would you ever consider looking at non-UK midcaps?
    I’m always interested in ways to diversify internationally.
    Thanks!

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    • comment-avatar

      Hi Abtan,

      I’m interested in US large-caps, and may discuss them from time to time. Don’t think that I can cover them on a regular basis, though, due to time considerations!

  • comment-avatar

    A couple of suggestions Cineworld given its exposure to USE and eastern Europe.
    Softcat a great growth company and providing ‘the picks and shovels’ of Tech.

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    • comment-avatar

      Thanks for the suggestion. Cineworld and Softcat are both on my list and up for consideration! Cheers.

  • comment-avatar

    Should read USA not USE!

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