A mid-cap company is one that has market capitalisation that is too small for it to be a blue chip (or large cap), but which is bigger than a small cap.
There are no strict rules for identifying a company as a mid-cap. In the UK companies in the FTSE 250 index are considered mid-cap.
There are some good arguments for paying particular attention to mid-cap shares.
- They are less heavily followed and analysed than large companies, and therefore there is a better chance of finding opportunities the market has missed.
- Being smaller than large companies, mid-caps are more likely to have room for growth within their industry.
- As businesses that have reached a certain scale they tend to be more stable than similar smaller companies.
- They tend to be less complex than large companies, and therefore easier to analyse.
- Analyst coverage and attention from investors is sufficient to ensure that disclosure is usually reasonably good. Accounts and reports tend to be more informative than those of small companies.