3 Mid-Caps to Have in Your 2021 Portfolio

The mid-cap space is often a great place to find up and coming companies. They aren't as stodgy as their large cap counterparts but tend to be financially stronger than small-cap stocks. Sort of the Goldilocks of U.S. equity investments—not too small and not too big.

This makes mid-caps a good choice for companies that have the scale to leverage their operations but are still limber enough to achieve solid growth. With the holidays winding down and a new year upon us, let us reflect on some of the mid-caps to consider decorating your 2021 portfolio with.

Will Winnebago Stock Do Well in 2021?

Winnebago (NYSE:WGO) stock has experienced some wild swings in 2020. It suffered a doomsday drop at the onset of the pandemic shedding two-thirds of its value over the course of a few weeks. Then the market realized that the manufacturer of recreational vehicles (RVs) would be an unusual beneficiary of today's strange new economy.

After racing back to a record high north of $70, Winnebago shares have taken a breather and can be had for around $62.50 heading into the new year. Why climb aboard now? Strong consumer demand for RV's isn't taking a breather.

People are as antsy as ever to embark on any kind of voyage that takes them away from home for a while. And with caution around air travel and vaccine deployment likely to drag well into the new year, RVs will remain a viable alternative to explore the seldom-seen great outdoors.

Sure, these things are expensive, but to those that can afford it, RVs offer a safe way to get a vacation while maintaining social-distance compliance. For this reason, the Recreational Vehicle Industry Association projects industry-wide RV shipments to reach a record 507,000 in 2021.

Analysts are expecting Winnebago's revenue growth to accelerate to 36% and earnings per share to more than double in 2021. The company has a record backlog of new orders in both of its operating segments—Motorized products and Towable products. And trading at a reasonable if not cheap valuation, investors should hitch their wagons to Winnebago.

What is Harley Davidson's Turnaround Plan?

While there are plenty of compelling mid-cap companies that don't sell products with wheels, Harley Davidson (NYSE:HOG) stands out as another stock worth taking for a spin.

The legendary motorcycle company has had another rough year. Sales are down substantially, and profits are way down. But next year things are expected to rev up as Harley's "Rewire" turnaround plan kicks into high gear.

The new five-year plan is expected to involve getting rid of excess inventory and refocusing on "quality over quantity". This should lead to a slimmer portfolio of motorcycle models that are more in-line with consumer trends and marketed through relevant social influencers. Gone may be the Harley image of the big-gutted old-timer and in its place an appeal to younger generations with spending power.

The plan will also likely involve an exit from several underperforming international markets to better serve its higher growth potential overseas markets.

While plenty of work and execution remains, Harley Davidson seems to have a fresh strategic direction that can put its recent slide in reverse. Analysts are forecasting 21% top-line growth in 2021. Due in part to cost reductions tied to restructuring, EPS are expected to be sharply higher off a weak 2020 base.

There could soon be good reason for investors to be high on the 'HOG'. If management can start to demonstrate progress with the Rewire program, this could restore investor confidence in the company and send Harley Davidson's shares on a joy ride.

Is Sprouts Farmers Market Stock a Buy?

Shifting gears, Sprouts Farmers Market (NASDAQ:SFM) is worth a look at current levels. Still well off the highs from its early IPO days of 2013, Sprouts has struggled to sprout consistent profit growth over the years. But things may be changing.

For starters, it wouldn't be surprising to see the fresh produce- focused chain get bought out by a bigger player in the highly fragmented grocery store industry.

Beyond the speculative takeover potential, Sprouts appears to be sowing the seeds for a reboot. Like other grocers, demand has been very strong amid the pandemic backdrop. This has led to year-over-year earnings growth in each reported quarter this year.

But aside from the near-term boost, Sprouts is looking fresher these days on account of some strategic changes. Investments in technology, product innovation, targeted digital marketing, and improved customer experience are the key tenants. In addition, a revamped e-commerce channel that includes an Instacart delivery partnership bodes well for growth as consumer shopping continues to gravitate to online in 2021.

These initiatives are creating a larger customer base from which to derive sales growth in the low-margin grocery space. Store expansion is helping in this regard as well. Sprouts is opening new locations at a breakneck pace and tacked on another six outlets in the third quarter. It now has nearly 200 more locations than it did when it made its NASDAQ debut seven years ago. This scale along with improved supply chain efficiencies could lead to better growth ahead.

Through three quarters, cash flow from operations is up 27% this year and the company's modest debt level is on the decline. A lot will have to fall into place for this stock to regain favor given the fiercely competitive nature of the grocery industry. But investors shopping for a defensive stock with decent upside potential may want to throw some Sprouts in their cart.