Mid-caps are starting to gain ground in the choices of foreign investors over the last two months of May-June with the stock exchange having climbed to the top of global returns, a sign that the Athens stock exchange now has a wider range of options for investment portfolios.
High-cap stocks usually attract most investors, since they are better known to the investment community through the reports of credit rating agencies.
However, in the last two months, when the Athens stock exchange has been climbing to new highs and the capitalization has returned to the levels of 2008, the mid-cap stocks are starting to stand out.
Mid-cap listed companies operate more in a growth environment, they do not have the necessary liquidity in their shares, however, they show strong growth rates which is usually reflected in their shares.
In the Greek market, a company’s capitalization must range between 100-500 million euros to be classified as mid-cap. Companies with a capitalization higher than 500 million euros are classified as high-cap, while companies that do not exceed 100 million euros belong to the small capitalization, without excluding some exceptions to the rule.
Mid-cap stocks are mainly classified as growth companies rather than value companies. This resulted in mid-caps outperforming high-caps in the post-pandemic cycle. However, even though we have globally observed a shift from growth companies to value companies, this did not seem to happen in Greece.
The strong advantage of mid-cap companies is the fact that the growth model they use has proven to be successful, since they have managed to avoid the definition of a small company whose business model runs the risk of being called unsustainable. Some of them will also be upgraded, as it is estimated that they will jump to high capitalization within a reasonable period.
Stocks with good results but average or low marketability seem to have attracted the investors’ interest in June. In the Greek market there are now several listed mid-caps with single-digit PEs accompanied by diends that, if nothing else, arouse curiosity as to whether they make investment sense.
The reduction of corporate tax, diends, and the abolition of the solidarity tax on the total indiual income gives more incentives to a company to show profits. They don’t have to “magically” change the bottom line. A small correction in the depreciation rates over the useful life of the fixed asset is enough to limit or increase the tax effect.
