The Potential of Mid-Cap Stocks: A Look at 14 Undervalued Holdings by Mutual Funds

Looking for mid-cap stocks with potential? Check out these 14 stocks held by mutual funds, expected to perform well in the future despite recent underperformance.

Undervalued Holdings by Mutual Funds

Fund managers continue to hold onto 14 mid-cap stocks in their portfolios, despite negative or minimal returns over the past two years. The stocks, including Syngene International and Petronet LNG, have yet to reach their full potential, and managers believe they will perform well in the future. Each of the 14 stocks is held by multiple active schemes, and many have seen increases in total income, net profit, and sales growth in the last few years.

Highlights:

  • Mutual funds continue to hold underperforming mid-cap stocks with future potential.
  • Syngene International, Colgate-Palmolive, Petronet LNG, and MRF are among the 14 stocks that could yield better returns.
  • Bayer CropScience, Gillette India, AU Small Finance Bank, and Procter & Gamble Hygiene and Health Care also make the list.
  • Sun TV Network, LIC Housing Finance, Shriram Finance, Max Financial Services, and Emami round out the 14 mid-cap stocks to watch.

We’re taking a look at 14 mid-cap stocks that are currently held by mutual funds but have yet to reach their full potential. Despite delivering negative or minimal returns over the past two years, fund managers continue to hold onto these stocks in their portfolios, believing that they will perform well in the future.

From the period between March 31, 2021, and March 31, 2023, the underperforming, but solid mid-cap stocks are:

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1. Syngene International

Ranked 12th among pharmaceutical companies on market capitalisation, Syngene International has seen its promotor holding reduce, while the share of domestic institutional investors and foreign institutional investors have increased.

Held by 60 active schemes, including Mirae Asset Focused, IDBI Healthcare, and Edelweiss Mid Cap.

2. Colgate-Palmolive (India)

In the last quarter of FY2022, the share price of Colgate-Palmolive moved upwards by 3.01%. DIIs holding has decreased to 7.12% while FIIs holding has increased to 21.11%.

Held by 18 active schemes, including DSP Quant, Templeton India Equity Income, and IDBI Dividend Yield.

3. Petronet LNG

Petronet has increased its year-on-year (YoY) investment by 13.58%. Net profit and sales have grown in the last three years at 18.63% and 46.58%, respectively.

Held by 11 active schemes, including Kotak Flexicap, DSP Natural Res & New Energy, and HDFC Housing Opp.

4. MRF

While the return on equity has declined and sales growth in the last three years have been below expectations, the last four quarters has seen a healthy sales increase of 19.59%.

Held by 12 active schemes, including SBI Equity Hybrid, Kotak Emerging Equity, and Tata Young Citizen Fund.

5. Bayer CropScience

Providing a 27.20% increase in return on equity, Bayer CropScience has a healthy outlook with a 10% growth in profit in the last three years, and a 15.06% increase in sales in the last four quarters.

Held by 24 active schemes, including Aditya Birla SL MNC, Nippon India Growth, and UTI MNC.

6. Gillette India

Gillette has witnessed sales growth of 12.58% in the last four quarters, while its return on equity has seen a 34% rise compared to the average of the past three years.

Held by 9 active schemes, including Aditya Birla SL MNC, UTI MNC, and Aditya Birla SL Tax Relief '96.

7. AU Small Finance Bank

This is an undervalued stock showing increases in key parameters such as total income and net profit to the tune of 26.56 and 40.06 CAGR in the last three years.

Held by 50 active schemes, including Nippon India Growth, Kotak ESG Opportunities, and Motilal Oswal Midcap.

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8. Procter & Gamble Hygiene and Health Care

With subdued sales growth and diminished return on equity, Procter & Gamble has managed to grow net profit by 11.13% in the last three years.

Held by 26 active schemes, including SBI Magnum Global, Aditya Birla SL MNC, and ICICI Pru FMCG.

9. Sun TV Network

A quality mid-ranged performer, Sun TV is currently trading closer to its 52-week low valuation, making it an attractive option for the longer term.

Held by 15 active schemes, including Aditya Birla SL Special Opp, Tata Equity P/E, and Mirae Asset Equity Savings.

10. REC

REC has been chosen as the nodal agency in carrying out several electrification schemes of the government. Furthermore, it’s tasked with the responsibility of improving the financial health and operational efficiencies of power distribution companies in India.

Held by 28 active schemes, including HDFC Mid-Cap Opportunities, HDFC Balanced Advantage, and HDFC Dividend Yield.

11. Shriram Finance

The total income has increased 7.46 CAGR in the last three years, along with return on equity and income growth.

Held by 29 active schemes, including Mirae Asset Midcap, Quantum Long Term Equity Value, and Mirae Asset Banking and Financial Services.

12. LIC Housing Finance

Yet another undervalued stock that has seen increases in total income in the last three years.

Held by 50 active schemes, including ICICI Pru India Opp, Quantum Long Term Equity Value, and Aditya Birla SL PSU Equity.

13. Max Financial Services

Max Financial Services is a qualitative stock with a healthy sales growth in the last four quarters. The promoters recently offloaded 30 lakh shares for Rs. 182 crores.

Held by 93 active schemes, including Motilal Oswal Midcap, ICICI Pru Midcap, and PGIM India Midcap Opp.

14. Emami

With a healthy growth rate in net sales and profit, Emami remains an undervalued stock that could see potential upside in the coming months.

Held by 59 active schemes, including SBI Large & Midcap, DSP Midcap, and Mirae Asset Emerging Bluechip.

Fund managers use various metrics to select stocks, but identifying the right entry point can be challenging. While some stocks may not perform as expected and may take longer to produce better results, fund managers hold onto them in the hopes that they will eventually play out well in the future.

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