Are these the best ASX mid-caps to watch?

ASX mid cap stocks are companies listed in Australia that sit somewhere between small cap and large cap status. Mid-caps used to be defined as having a market capitalisation between $1 billion and $5 billion, though more recently this has been upped to a valuation of between $2 billion and $10 billion.

Mid-caps explained

Just like ‘blue chips,’ there is no clearly agreed definition — so there is an element of subjectivity to the classification. However, the general consensus is that mid-caps have less of the risk associated with penny stocks, but with higher potential rewards than blue chips offer. Of course, the reverse is also true — a mid-cap is riskier than a large cap company and may be less rewarding than the right penny share.

As a rule, mid-caps do have somewhat established market position, and can be attractive targets for mergers and acquisitions. Indeed, many of the most promising ASX mid cap stocks never grow to large cap status as they are either bought out by bigger fish or swallowed by private equity before they reach too large a size.

They also offer investors portfolio diversification, as they can reduce overall risk because their performance is often not correlated with larger or smaller stocks.

On the other hand, mid-caps are typically volatile, can be less liquid than larger businesses, and often have less analyst coverage — making informed investing decisions trickier. They are usually also more sensitive to wider market conditions, and especially rate rises; typically, mid cap companies grow faster when rates are lower.

Of course, these general rules cannot be applied to individual companies. And as always, past performance is not an indicator of future returns.

Best ASX mid-caps to watch

The following five ASX mid-caps have delivered the largest capital gains on the ASX over the past 12 months. It’s worth noting, however, that these rises may not be sustainable or continue into the future.

1. Azure Minerals
2. Megaport
3. Life360
4. Tuas
5. Paladin Energy

Azure Minerals

Up 773%, Azure Minerals is undergoing a large exploration campaign at its 60%-owned flagship multi-commodity Andover project. The major focus remains on building the lithium resource, with between six and eight diamond core drilling rigs and several reverse circulation rigs in operation.

Multiple mineralized intersections have been reported over the past year, with grades of 1.2% to 1.3% Li2O being returned. An exploration target has been published, comprising a range of between 100 and 240 million tonnes grading at 1.0% to 1.5% Li2O — and Azure hopes to publish its maiden Mineral Resource Estimate shortly.

It’s worth highlighting that even though there is also ongoing exploration for other minerals, lithium’s price fell sharply in 2023. Even though green shoots may be emerging, this makes Azure’s success arguably even more impressive.

Megaport

Up 259%, Megaport does business in multiple sectors, but its offers a platform which partners with leading global service providers, data centre operators, systems integrators, and managed services companies to help businesses get access to their networks.

This Network as a Service (NaaS) model means that Megaport can scale fast — as evidenced by the share price rise — with more than 850 enabled locations and 365 service providers across 25 countries.

Megaport operates one of the biggest SDN platforms globally, with a large part of its service comprising connecting customers to major cloud providers like Google Cloud, Amazon Web services and Microsoft Azure. The appeal is that its customers can establish connections instantly, and without needing to sign up to long-term contracts.

Given the rise of AI, it’s not hard to see why the company has performed so well — though it remains tied to any potential downturn too.

Life360

Up 183%, Life360 owns the world’s number one family safety app, with its family of apps including Tile Bluetooth trackers and Jiobit GPS trackers, to offer complete location safety for family members, friends and pets.

At the end of 2023, the business boasted 61.4 million global monthly active users — up by 26% year-over-year —, more than 1.8 million global subscribers, and $274.1 million in annualised monthly revenue, an increase of 22% over 2022.

In recent results, CEO and co-founder Chris Hulls enthused that ‘looking forward to CY24, we are excited to announce the creation of a new advertising revenue stream that offers partners unparalleled reach to Life360's enormous free user base, and more than 20 million daily active users (DAU) connecting with their families and friends.’

Tuas

Up 148%, Tuas Limited is a growing Singaporean mobile network operator which offers the standard variety of mobile telecommunication services including data, voice, SMS, roaming and other plans.

In recent half-year results, Tuas reported a 38% year-over-year increase in revenue to $54.7 million — driving EBITDA up by 56% to $22.4 million. This was driven by its ever growing subscriber base.

Having initially started life as a consumer mobile business, late last year the firm announced it was transitioning into a full-service telecoms company — launching broadband facilities, followed by business and enterprise services.

This has left investors contemplating even further growth.

Paladin Energy

Up 111%, Paladin Energy is an ASX 200 uranium company which holds a 75% interest in the world-class Langer Heinrich mine in Namibia.

The mine has previously produced over 43 million pounds of uranium trioxide — and the flagship mine is currently on a strong return to production trajectory, with first volumes drummed last month. Paladin also boasts a well-regarded uranium exploration portfolio across Australia and Canada.

The company’s success over the past 12 months is arguably due to the rising uranium price, itself a symptom of geopolitical instability — with states reconsidering the self-sufficiency of nuclear power in an increasingly conflicted world.

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