Three affordable mid-cap stocks in the UK for growth and stability

The Merchants Trust's lead portfolio manager, Simon Gergel, has chosen three UK mid-cap stocks that you should purchase right now

The Merchants Trust invests mostly in high-yielding UK large cap companies in an effort to provide above-average income and income growth as well as long-term capital growth. For 43 years in a row, it has paid an increasing dividend. We look for companies with solid fundamentals that are trading below their intrinsic value, preferably in industries with promising long-term growth. We have recently discovered value in medium-sized enterprises, such as the three listed below.

Three mid-cap stocks from the UK to think about.

Not to be confused with the sugar brand, Tate and Lyle (LSE: TATE) is a producer of specialty ingredients. It collaborates with food manufacturers to reformulate goods to include fiber, protein, and other ingredients while lowering sugar, calories, and fat. Because of the technical expertise and solutions it can offer manufacturers, the company should be able to grow steadily while generating high returns. Tate & Lyle has undergone a protracted period of change, including the sale of its more commercialized US corn processing business, multiple acquisitions of specialty ingredient businesses, the addition of new product lines, and the development of new client relationships.

Although the company's quality has increased as a result of this process, earnings have decreased. Furthermore, the current trading climate has been challenging, particularly in the important US market, where consumers have cut back on their food purchases due to increased inflation. Due to this confluence of circumstances, earnings have been downgraded, and the shares have drastically declined. Tate & Lyle is a stronger company than it was a few years ago, in our opinion, but it is also trading at a much lower valuation, which we believe indicates opportunity.

The article is continued below.

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Start your trial Hikma Pharmaceuticals (LSE: HIK) is a North American, Middle Eastern, North African, and European manufacturer of branded, generic, and specialty pharmaceutical products. Injectables, branded, and generics (now known as Hikma Rx) comprise the company's three business segments. The company's manufacturing is mostly done internally, and it is vertically integrated.

It gains from a number of constructive structural themes. Injectables and other generics are becoming more popular due to pressure on health budgets. As people age, new treatments are being developed, and populations are growing and becoming wealthier, particularly in the Middle East and Africa, there is an increasing need for healthcare. Hikma's sales and profits have historically increased significantly. The company's strong competitive position and growth potential are reflected in its high valuation, which has been the norm. Nevertheless, a number of incidents caused the valuation to decline. In addition to Hikma's particular problems and management changes, the pharmaceutical industry has generally declined. Last year, there was an opportunity to purchase a solid stock at a competitive price due to the sharp decline in shares.

Premier Inn, the biggest hotel chain in the United Kingdom, is being expanded into Germany by Whitbread (LSE: WTB). The company's size, reputation, and substantial freehold asset base give it a significant competitive edge over rivals. The investment case focuses on the company's five-year growth plan, which includes recycling capital for investments and share buybacks, expanding the estate in Germany and the UK, increasing efficiency, and repurposing underperforming restaurant space into additional rooms. We believe that the share price does not accurately reflect the company's strong competitive position and medium-term growth prospects.