If you think of the stock market as a big family, mid-cap stocks are definitely the middle children. Just as the so-called middle child syndrome suggests that middle children often feel ignored and have to fight for their parents' attention, mid-cap stocks often don't get the same respect that bigger and smaller stocks enjoy.

We tend to be impressed with the size and stability of large-cap stocks like Altria Group, Boeing, or Nike (NYSE:NKE). We may also love them for their dividends, which (assuming the company is healthy) will keep arriving no matter the economic environment.

Yet we also like small caps, because they're more able to surge in value, as it's easier for a $100 million company to become a $500 million company than it is for a $50 billion company to become a $250 billion one.

Not too big, not too small
Nevertheless, investing in companies between those two stages can sometimes give you the best of both worlds. Mid-caps, with market caps roughly between $1 billion and $10 billion, are not so small that they're prone to enhanced volatility, yet not so big that it's hard for them to grow quickly. They also often pay dividends, unlike small caps, and those dividends sometimes grow quickly.

If you're interested in mid caps, you can invest in some 400 of them via the MidCap SPDRs (MDY), which tracks the S&P Midcap 400 index of mid-cap companies. It has outperformed the S&P 500 index of large caps by a healthy margin every year this decade except for 2006. Its largest holdings are steelmaker Cleveland-Cliffs (NYSE:CLF) and Arch Coal (NYSE:ACI).

You can choose to not spread yourself so thin, though, by picking a few individual mid caps to invest in, instead of 400. Consider using a stock screen to get you started with some candidates. With our Motley Fool CAPS screener, I screened for companies with market caps between $2 billion and $10 billion, price-to-earnings ratios below 20, and three-year revenue growth above 15%.


CAPS Rating

P/E Ratio

3-Year Revenue Growth

Regions Financial (NYSE:RF)




Zions Bancorp (NASDAQ:ZION)




Titanium Metals (NYSE:TIE)








Source: Motley Fool CAPS.

Finally, if you're looking for companies that are not too big and that seem undervalued to our analysts, I invite you to test-drive our Motley Fool Hidden Gems newsletter for free.

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Garmin is a Motley Fool Global Gains pick and a Motley Fool Stock Advisor recommendation. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.