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Though the summer season doesn't technically end until the Sept. 22 equinox, it sure feels as if fall is bearing down. Leaves are beginning to turn, temperatures are steadily declining, and many children have already returned to school.
But one thing that hasn't changed is our zeal for finding great investments. More specifically in this case, we asked three Motley Fool contributors to each pick a mid-cap stock -- that is, a business with a market capitalization generally in the range of $2 billion to $10 billion -- which they think investors would be wise to consider buying in September. In particular, mid-cap stocks can offer an intriguing combination of growth potential not enjoyed by their large-cap counterparts, and often without quite as much volatility of stocks in the small-cap range.
So if you have any money left after this summer's slew of cookouts, vacations, and back-to-school shopping, you might consider putting it to work in one of these three promising mid-cap stocks.
Review these market-beating gains
Steve Symington: On the heels of Yelp's (YELP 3.11%) latest quarterly beat and raise three weeks ago, I think investors would be wise to pick up shares of the local-business review specialist this month. That's not to say Yelp stock looks cheap based on traditional metrics. Yelp isn't profitable based on generally accepted accounting principles -- yet -- albeit primarily as the company invests to sustain its growth and scale its business instead.
As it stands, Yelp is making impressive headway domestically in expanding the reach of its platform, improving monetization, and fostering its core local advertising business. Local ad revenue growth, for example, accelerated to 41% year over year last quarter, while cumulative reviews increased 30% year over year, to 108 million. Yelp also saw app unique users climb 27% year over year, to 23 million, on a monthly average basis. And those app users -- who typically view over 10 times as many pages as website users -- now represent around 70% of Yelp's total page views.
What's more, Yelp's earlier-stage international sites made some encouraging progress last quarter, with international revenue climbing around $500,000 sequentially, to $3.7 million. But that's also just over 2.1% of Yelp's total sales. And Yelp management has confirmed that while its primary focus remains on making the most of the stateside momentum, the company has begun to focus some efforts on trying to unlock additional ad distribution opportunities overseas.
In the end, for patient investors willing to buy and hold Yelp shares as this growth story plays out, I think Yelp is poised continue handily beating the market going forward.
Generate some serious green
Matt DiLallo: Brookfield Renewable Partners (BEP +2.40%) might be a mid-cap stock by market cap, but that doesn't diminish the fact that this is a global clean-energy behemoth. The company currently controls 10,000 megawatts of renewable-energy capacity, which is enough to power 4 million homes.
At its core, Brookfield Renewable Partners is a hydroelectric power generator, though it does own a growing wind business. What's most important to understand about these assets is that Brookfield locked up 90% of its revenue under long-term contracts that have an average duration of 16 years. Because of that, it generates a steady stream of predictable cash flow, of which 70% gets returned to investors each year via a very generous distribution that currently yields nearly 6%.
That said, Brookfield Renewable Partners is not just an income stock. Its objective is to deliver a healthy total return to investors over the long term. Driving that return is its aim to grow the payout by 5% to 9% per year while delivering long-term total returns of 12% to 15% annually. Those plans are not just hopeful forecasts, because the company has several proprietary hydro projects under development around the world, as well as an excellent track record of value creating M&A.
Digging deep for an amazing value stock
Sean Williams: If you're looking to go mid-cap bargain hunting in September, I can think of no better stock to put on your plate than Yamana Gold (AUY +0.00%), which is down nearly 30% over the past month.
Weaker gold prices coupled with improved economic data have given the Federal Reserve a much better chance of raising interest rates in September, which is typically bad news for gold since it'll make fixed-income assets a little more attractive. However, I'd caution precious-metal bears that a quarter-point rate hike isn't exactly going to make a 1% CD "attractive." The opportunity cost to bypass fixed-income assets in favor of gold or other precious metals is still incredibly low, which should help buoy gold and silver prices.
What makes Yamana Gold so intriguing are its opportunities for expansion. For instance, Yamana recently announced the acquisition of Riacho dos Machados from Carpathian Gold for $48.5 million, which should give it access to a mine capable of up to 100,000 ounces of gold per year. It won't take but a year or so to completely ramp up RDM to full production. Furthermore, development at Cerro Moro and C1 Santa Luz remains on track, with both mines expected to begin contributing to full-year production in early to-mid 2018. All told, I believe we could be looking at a 40% to 50% expansion in gold production by the end of 2018.
Yamana also has a trick up its sleeve when it comes to reducing its costs. In addition to reducing its capital expenditures like most miners in order to lower its all-in sustaining costs (AISC), Yamana also uses its mined byproducts, such as copper, to reduce its gold-mining expenses. Based on the current spot price of gold, Yamana is generated about $350 an ounce in margin over its second-quarter AISC. That's a fairly large buffer.
Looking ahead, Yamana's production growth is expected to double its cash flow per share between 2015 and 2019 (it's trading at less than four times its projected 2019 cash flow per share), while nearly quadrupling its EPS between 2016 and 2019. Yamana is a name that could turn some heads, and I'd suggest investors take note.
