One area of the market which I think is home to a large number of promising companies is the mid cap space.
What is a mid cap? There are various opinions on how to categorise a mid cap share and it can change depending on which share market you are looking at.
On the Australian share market, I would class a mid cap share as a company with a market capitalisation in the range of $500 million to $5 billion. Anything less I would label a small cap and anything greater a large cap.
Why buy mid cap ASX shares?
I’m a fan of mid cap shares because I believe they offer investors the best of both worlds – greater potential returns than large caps, but less risk than small caps.
Luckily for investors, there are a large number of mid cap shares trading on the ASX which I believe offer compelling risk/rewards.
Two that I would buy are listed below:
Nearmap Ltd (ASX: NEA)
The first mid cap share to look at is this leading aerial imagery technology and location data company. Nearmap’s software gives businesses instant access to high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools. This is proving very popular with end users as it allows them to conduct site visits from the safety of their own home or office. It also enables informed decisions, streamlined operations, and ultimately significant cost savings for businesses. Due to Nearmap’s high quality product offering and its sizeable opportunity in a fragmented market, I believe it has the potential to grow its sales at a very strong rate over the next decade.
Pushpay Holdings Group Ltd (ASX: PPH)
Another mid cap share which I rate highly is Pushpay. It is a donor management platform provider which has been growing at an explosive rate in recent years thanks to increasing demand for its platform in the church market. Although its shares have been on fire this year, I don’t for a second believe it is too late to invest. After all, Pushpay still has a very long runway for growth over the next decade. Management is aiming to capture a 50% share of the medium to large church market in the future. This represents a US$1 billion opportunity, which is many times its current revenue. Given the quality of its platform and a major recent acquisition which has bolstered its offering, I believe there is a high probability of the company achieving its target.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and PUSHPAY FPO NZX. The Motley Fool Australia has recommended Nearmap Ltd. and PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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