We recently compiled a list of the 10 Best Mid Cap Value Stocks To Invest In. In this article, we are going to take a look at where Western Alliance Bancorporation (NYSE:WAL) stands against the other best mid cap value stocks to invest in.
Mid-Cap Stocks are Better in the Near Term
An easing cycle coupled with an upcoming election creates quite the environment for differing opinions to co-exist. On October 9, Jill Carey Hall, Bank of America Global Research head of U.S. small and mid-cap strategy and senior U.S. equity strategist, joined ‘Squawk Box’ on CNBC to discuss her bullish stance on mid-cap stocks, especially in the near term.
Hall stresses that small-cap stocks have been underperforming since the 50 basis point rate cut, going against historical expectations of small-caps performing well in such cases. She emphasized that investors are focused on stocks with stronger fundamentals and small-cap stocks are currently stuck in an earnings recession. We have yet to see a recovery season for small caps, the way we have been seeing it for slightly larger stocks, Carey adds.
READ ALSO: 10 Most Profitable Value Stocks To Invest In and 10 Most Promising Mid-Cap Stocks According to Hedge Funds.
Carey shares that mid-cap stocks are likely to be a “better hedge” in the near term, as they boast stronger fundamentals and have better earnings trends. Overall, she believes that mid-cap stocks have historically performed better than small-caps and are, therefore, a better area to target. She also emphasized that one rate cut is not going to solve the re-financing risk that small-caps, especially companies in real estate and tech, inherently come with.
She adds that investors must focus more on themes rather than specific sectors. However, with the current economic backdrop and a soft landing in sight, she advises investors to remain inclined towards stocks with positive revisions, higher quality, and stronger dividend yields, given that as the Fed continues to cut rates, money is expected to be driven more into equity income.
Carey also shares that the current economic environment has been weak but we may see acceleration after this quarter, keeping in mind that current GDP and jobs data have been “encouraging.” While she upholds an element of uncertainty, she remains focused on less risky and high-quality stocks. As investors look to the Fed as a catalyst for the market, high-quality stocks trading at discounted valuations are likely to reap greater benefits.
Our Methodology
To come up with the 10 best mid-cap value stocks to invest in, we used the Finviz stock screener. We set the market capitalization filter to range between $2 billion and $10 billion and the Forward P/E filter to under 15. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted primarily in ascending order of the number of hedge fund holders as of Q2 2024 picked from our database and secondarily in order of their forward P/E and market capitalization.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer walking into a bank branch, expressing the convenience of consumer banking services.
Western Alliance Bancorporation (NYSE:WAL)
Number of Hedge Fund Holders: 32
Market Capitalization as of October 28, 2024: $9.16 Billion
Forward P/E as of October 28, 2024: 11.5
Western Alliance Bancorporation (NYSE:WAL) ranks eighth on our list of the best mid cap value stocks to invest in. The company provides commercial and business banking solutions to people across the United States.
Western Alliance Bancorporation (NYSE:WAL) is one of the best-performing companies in the United States and has more than $80 billion in assets. Its subsidiary, Western Alliance Bank, offers a wide variety of personalized commercial banking solutions and consumer products. As of September 30, the company had total deposits worth $68 billion, up from $54.3 billion on September 30, 2023, representing an increase of $13.8 billion.
During the third quarter of 2024, Western Alliance Bancorporation (NYSE:WAL) generated $199.8 million in net income, up 7.8%. Net revenue reached $823.1 million, up by nearly 15% from the same period in 2023. Additionally, net interest income totaled $696.9 million in Q3 2024, up by 6.1% sequentially and 18.7% year-over-year. WAL celebrated sustainable loan and deposit momentum along with growth in earnings during Q3 2024.
Overall, Western Alliance Bancorporation (NYSE:WAL) was held by 32 hedge funds at the close of Q2 2024, according to the Insider Monkey database. The company has a solid business model and sustainable income source, positioning it as a valuable and profitable stock.
Miller Value Partners Miller Value Deep Value Select Strategy stated the following regarding Western Alliance Bancorporation (NYSE:WAL) in its fourth quarter 2023 investor letter:
“During the quarter, our largest positive contributor was Western Alliance Bancorporation (NYSE:WAL), whose market price was up more than 40%. Western is a leading national commercial bank with a capital-light business model. The company appears to me to be positioned for long-term growth at the high end of their peer group. WAL has industry-leading underwriting (as evidenced by their low loss rate) and return on assets, which, in my view, support their 18-20% target return on common tangible equity target.Consensus expectations remains in the 15% range potentially providing a nice ongoing variant. Western’s mortgage business is also a “hidden asset” not being sufficiently recognized in the company’s current share price in my opinion. At more than 10% of their company revenue and near trough profitability, any future recovery in the mortgage market from lower interest rates could provide greater future earnings power. WAL’s shares remain attractively priced with a price-to-estimated earnings ratio (FY2) below 7x, a 40% discount to its historical long-term average and a greater than 30% discount to their banking peer group.”
Overall, WAL ranks 8th among the 10 best mid cap value stocks to invest in. While we acknowledge the potential of WAL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.