Credit Suisse has many sector and macroeconomic research reports, but one that always stands out is the Small & Mid Cap portfolio changes. Of the dozens of companies included in the report, only four additions were made for May.
These companies generally have market caps under $8 billion, and the four new additions are among 57 such stocks in the total small and mid cap strategy top picks for May. The Credit Suisse analysts identify and rank up to three top stock picks based on a six- to 12-month time horizon, which are picked from their high conviction stocks.
Allegheny Technologies Inc. (NYSE: ATI) was named as the new #1 Top Pick in industrials for the small-mid cap aerospace and defense sector. The firm’s Julie Yates has a price target of $47.00, versus a $41.20 share price. Yates believes that its outperformance has been tied to nickel prices, but she thinks that investors are underappreciating the fundamental improvement in demand and pricing trends. Cost reductions are also helping out here.
ALSO READ: Is ‘Sell in May and Go Away’ the Right Call in 2014?
EnLink Midstream LLC (NYSE: ENLC) is the new #1 Top Pick in the small-mid cap space in energy and utilities. The firm’s John Edwards said:
Following the closure of the merger between Crosstex and Devon midstream, we expect EnLink to trade at a premium given the backing of Devon Energy as a strong sponsor and visible opportunities for dropdowns and organic growth. We believe that the GP is best positioned to take advantage of the transformational deal as ENLK is very low in the splits, distribution growth of 20% or greater is targeted over the long term. We expect that NOLs and cash from the dropdowns will allow the new GP to offset taxes for several years to come.
After closing at 435.33, the target price is up at $47.00.
Tenet Healthcare Corp. (NYSE: THC) is the new #2 Top Pick for health care in the small-mid cap space. The $51 price target compares to a $45.08 close. The firm’s Ralph Giacobbe said:
We believe THC will be a net beneficiary from healthcare reform and will be uniquely positioned to see benefits in the early months of the ACA given its footprint in Medicaid expansion states, strong exchange contracting particularly with various Blues plans and status as a low cost provider.
HeartWare International Inc. (NASDAQ: HTWR) was named as the new #3 Top Pick for health care in the small-mid cap space. The firm’s Bruce Nudell has a $110 price target, versus a $84.96 price. He sees sequential market share gains. This one was recently raised to Outperform from Neutral as well.
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