U.S. stock markets have been witnessing an astonishing bull run since the beginning of 2023 barring some minor fluctuations. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are currently rotating around their all-time highs.
The S&P 500 and the Nasdaq Composite have recorded several all-time highs in 2025. Meanwhile, the mid-cap benchmark — the S&P 400 index — is also up 4.9% year to date. The index is currently 4.6% away from its 52-week high posted on Nov. 25, 2024.
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. These may also become large caps over time.
If economic growth slows down due to any unforeseen internal or external disturbance, mid-cap stocks will be less susceptible to losses than their large-cap counterparts owing to their lower international exposure.
On the other hand, if the economy continues to thrive, these stocks will gain more than small caps due to established management teams, a broad distribution network, brand recognition and ready access to capital markets.
Here, we recommend five mid-cap stocks with a favorable Zacks Rank for the rest of 2025. These are: Dillard's Inc. DDS, Sterling Infrastructure Inc. STRL, StoneX Group Inc. SNEX, Armstrong World Industries Inc. AWI and Watts Water Technologies Inc. WTS. Each of our picks currently sports 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 three months.
Image Source: Zacks Investment Research
Dillard's has been benefiting from its strategic efforts to capture growth in both its brick-and-mortar and e-commerce businesses. These initiatives are enhancing customer acquisition and retention, aided by store remodels, improved brand partnerships, and strong demand for activewear.
DDS’ focus on fashionable and exclusive merchandise continues to attract shoppers, while tight expense management contributed to better-than-expected earnings in the last reported quarter. DDS also stands out for its strong financial health, with solid liquidity, minimal rent obligations as it owns most of its real estate, and a healthy cash balance. Shareholder-friendly moves like steady dividends and buybacks reflect DDS’ strong confidence.
