Savvy investors that loaded up on the stay-at-home stocks made a fortune earlier this year, as some of the top stocks had parabolic upside moves despite not always having the fundamentals to back up those huge moves. With two COVID-19 vaccines that appear to have 95% efficacy seemingly ready to go, it may very well be time for a shift in momentum, and one top Wall Street strategist has a list of top companies that could be poised for a monster 2021.

Jefferies Small and Midcap strategist Steven DeSanctis likens the current situation to the end of the 1999 to 2000 tech bubble, when sales started to slow for high-multiple momentum stocks, and they were absolutely eviscerated while other areas of the market saw some growth. With the stay-at-home stocks having the potential to start slowing dramatically, other areas that lagged during 2020 could be ready to take off.
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The research report noted this about the current strategy:

We think strong merger and acquisition activity rolls into 2021, as companies are flush with cash, companies are being ignored and should go private, and scale matters. The trend in 2021’s earnings and sales versus 2019 keeps heading higher, valuations are still very cheap, housing is a gift that keeps giving and is better for small caps.

DeSanctis and his team screened the Jefferies Buy-rated names for those that are expected to see better sales growth in 2021 than 2020, have seen upward earnings and sales revisions and trade at below-market multiples. Many top companies made the list. These five offer investors some serious upside potential. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Deckers Outdoor

This clothing manufacturer makes some of the hottest-selling products and could be poised for a solid fall and winter selling season. Deckers Outdoor Corp. (NYSE: DECK) designs and markets footwear and accessories for men, women and children.

Deckers sells its products, including accessories such as handbags, headwear and outerwear, through domestic and international retailers, international distributors and directly to end-user consumers both domestically and internationally, through websites, and retail stores under the UGG (73% of revenue), HOKA (14%), Teva (6%), Sanuk (3%) and Koolaburra (3%) brands.

Jefferies noted earlier this year that while UGG is typically viewed as a fall/winter brand, the products’ strong sell-through during the pandemic helped further legitimize its standing as a year-round brand. In addition, HOKA remains on a path to be a $1 billion brand.

The Jefferies price target for the shares is $300, but the Wall Street consensus target is slightly higher at $304. Deckers Outdoor stock ended Friday at $247.21.

Freeport-McMoRan

This may be a compelling value at current trading levels, and it is one of the top picks at Jefferies in its sector. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and molybdenum producer, and the eighth largest gold producer. Its key operating and development assets are in Indonesia, North and South America, and Africa.

Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects and would clearly benefit from stronger demand and higher prices for industrial commodities.

Jefferies has a $23 price target, while the consensus price target is $20.75. Freeport-McMoRan stock closed at $21.25 a share on Friday.

This top stock to buy offers intriguing potential for value expansion. Huntsman Corp.’s (NYSE: HUN) portfolio of businesses represents a diversified set of chemical products touching an even broader set of end markets.
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The company reports across four business segments (Polyurethanes, Advanced Materials, Performance Products and Textile Effects) representing the revenues and profits from the company’s exposure to five primary chemical chains. Across many of these platforms, Huntsman operates a vertically integrated footprint from upstream commodities to downstream derivatives.

The company now has one of the strongest balance sheets in the sector, combined with progress reducing cyclical risk and ample opportunity to grow faster than gross domestic product due to innovation.

Holders of Huntsman stock receive a 2.66% dividend. The $30 Jefferies price target compares with a $27.58 consensus target and the most recent close at $24.40.

Lear

This one has bounced nicely off the September lows but still offers a solid entry point. Lear Corp. (NYSE: LEA) is a supplier of automotive seating and electrical systems. The company generates approximately 75% of its revenue from its seating business, with the remainder attributable to electrical systems.

Lear has made significant strides in its restructuring efforts, and it is the second-largest seating supplier globally. Recently Lear was named a GM Supplier of the Year by General Motors during a virtual ceremony honoring the recipients of the company’s 28th annual Supplier of the Year awards. This is the 19th time Lear has been named a GM Supplier of the Year. As a winner in 2019, Lear’s seating division exceeded GM’s targets for business performance and cultural priority metrics.

Investors receive a 0.72% dividend. Jefferies has set a $150 price objective. The consensus target price is $149.72, and Lear stock was last seen trading at $139.18.

Owens Corning

This top company was added to the firm’s Franchise Picks list earlier this fall. Owens Corning (NYSE: OC) sells glass fiber reinforcements and other materials for composites, as well as residential, commercial and industrial building materials worldwide.

The company operates in three segments. The Composites segment manufactures, fabricates and sells glass reinforcements in the form of fiber, and it manufactures and sells glass fiber products in the form of fabrics, non-wovens and other specialized products.

The Insulation segment manufactures and sells fiberglass insulation into residential, commercial, industrial and other markets for thermal and acoustical applications, and it manufactures and sells glass fiber pipe insulation, flexible duct media, bonded and granulated mineral fiber insulation, cellular glass insulation and foam insulation used in above-grade and below-grade construction applications.

The Roofing segment manufactures and sells residential roofing shingles, oxidized asphalt materials and roofing components used in residential and commercial construction and in specialty applications, as well as synthetic packaging materials.

Investors receive a 1.33% dividend. The Jefferies price target is $84. The consensus target is $79.33, and the last Owens Corning stock trade on Friday was reported at $70.78.

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While Jefferies has been positive about a rotation to cyclical stocks for some time, the potential for an opened and improving economy, especially later in 2021, bodes well for these top ideas. They all make sense for growth investors looking to add quality small and midcap companies to their portfolios.

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