Wall Street maintained its rally in the first week of 2021 after an astonishing finish to last year despite the pandemic. Most of the market participants and financial experts are busy talking about the impressive performance given by the large and small-cap stocks. However, the stellar show by the mid-cap  (market capital .> $1 billion and < $10 billion) stocks cannot be ignored.

In 2020, the mid-cap centric S&P 400 Index climbed 11.8%. Several mid-cap stocks have become large caps despite coronavirus-led severe economic devastations. Meanwhile, a few mid-cap stocks from the technology sector with a favorable Zacks Rank are poised to surge this year. Investment in these stocks will be prudent to strengthen your portfolio.

Importance of Mid-Cap Stocks

Investment in mid-cap stocks is often recognized as a good portfolio diversification strategy. These stocks combine the attractive attributes of both small and large-cap stocks. Top-ranked mid-cap stocks have a high potential to enhance their profitability, productivity and market share.

If the economic impacts of coronavirus are more severe ahead, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to less international exposure. On the other hand, if the crisis doesn’t worsen due to vaccination, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to the capital markets.

Importance of Technology Sector

In the long term, the technology sector will be a force to reckon with in the market. We must not forget that the growing demand for hi-tech superior products has been a catalyst for the sector in an otherwise tough environment. A series of breakthroughs in 5G wireless network, cloud computing, predictive analysis, AI, self-driving vehicles, digital personal assistants and IoT, have boosted the overall space.

The thrust for digitization is likely to come from two sides. Individuals, who enjoy immense benefits of digital platforms during coronavirus-led lockdowns, are less likely to go back to their old habits. The new way of connecting has opened up a new world for them. Also, business entities will be more interested in cloud computing, automation and AI to establish smooth supply chain systems.  

Our Top Picks

We have narrowed down our search to five mid-cap technology stocks that have popped in the past six months. These stocks have strong growth potential in 2021 and witnessed robust earnings estimate revisions within last 7 to 30 days. Each of our picks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks in the past six months.

TechTarget Inc. TTGT is a leading online Information Technology (IT) media company that provides IT companies with Return On Investment-focused marketing programs to generate leads, shorten sales cycles and grow revenues.

The company has an expected earnings growth rate of 34.6% for the current year. The Zacks Consensus Estimate for the current year has improved 19.8% over the last 30 days. The stock price has soared 112.5% in the last six months.

NETGEAR Inc. NTGR designs, develops and markets networking and Internet connected products for consumers, businesses and service providers. It operates in two segments — Connected Home, and Small and Medium Business.

The company has an expected earnings growth rate of 12.9% for the current year. The Zacks Consensus Estimate for the current year has improved 9.2% over the last 30 days. The stock price has jumped 68.5% in the last six months.

Littelfuse Inc. LFUS provides products that are vital components in virtually every market that uses electrical energy, from consumer electronics to automobiles, commercial vehicles and industrial equipment.

The company has an expected earnings growth rate of 29.3% for the current year. The Zacks Consensus Estimate for the current year has improved 4.9% over the last 30 days. The stock price has climbed 62% in the last six months.

Yelp Inc. YELP operates an online platform that connects consumers with local businesses in the United States, Canada and internationally. It covers restaurants, shopping, nightlife, financial services, health and a variety of services.

The company has an expected earnings growth rate of 98% for the current year. The Zacks Consensus Estimate for the current year has improved more than 100% over the last 7 days. The stock price has appreciated 43% in the last six months.

Semtech Corp. SMTC designs, develops, manufactures and markets analog and mixed-signal semiconductor products and advanced algorithms for commercial applications.

The company has an expected earnings growth rate of 28% for next year (ending January 2022). The Zacks Consensus Estimate for next year has improved 0.5% over the last 7 days. The stock price has advanced 41.9% in the last six months.

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