These SMID-cap stocks could outperform in the near term - Jefferies

These SMID-cap stocks could outperform in the near term - Jefferies
Credit: © Reuters.

Jefferies equity strategists reflected on the recent performance of SMID-Cap stocks.

In recent months, Value got cheaper than Growth, according to strategists, following a better-than-expected employment report for May.

“We have seen the VIX index plummet along with HY spreads narrowing, thus small caps moved into the leadership role of the market. It has not been a straight line, but we think the trend is our friend and can continue for now. Expectations for Q2 are set awfully low in our opinion, relative valuations are still in the 7th percentile and back to '02 levels, and equity and credit markets have opened thus companies that need to fix their balance sheets can. We have also seen an acceleration of M&A, which supports the case for small over large,” the strategists said in a note.

They did an in-depth analysis looking for attractive laggards in this space and found quite a few names. The idea was to look for potential names that could catch up to the broader market.

“We looked for names that have lagged since May 31 through July 26, that are Buy rated by our analysts, and ranked well on our Quality and Balance Sheet blocks.”

While the search yielded 17 results in total, here are 5 stocks that found their names on this list: Electronic Arts (NASDAQ: EA ), Tapestry (NYSE: TPR ), Toast (NYSE: TOST ), Lattice Semiconductor (NASDAQ: LSCC )), and DocuSign (NASDAQ: DOCU ).

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