It has been a while for sure, but as the old adage says that every dog has his or her day. In this case, the dog in question is the Russell 2000. This index measures the performance of the 2,000 smaller companies that are included in the Russell 3000 Index, which itself is made up of nearly all U.S. stocks. The Russell 2000 is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.
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In a new Jefferies report, outstanding small and midcap strategist Steven DeSanctis and his team screened for quality companies in the Russell 2000 that are rated Buy and are not trading at 52-week highs. The report said this about the outstanding performance over the past year:
The Russell 2000 has just completed its best 12-month gain ever and by a fairly wide margin. Subsequent performance after a big run is weaker, however, relative valuations versus large stands in the 58th percentile, the macro backdrop is getting much better and reflected in earnings and revenue estimates moving faster than performance, mergers and acquisitions activity is accelerating and Steven thinks fund flows will continue to be strong into the size segment. The rotation has been incredibly fast, but he still believes that value and cyclicals are the places to be. Value is still very cheap versus Growth, its earnings and sales estimates are moving up faster than Growth and a better M&A backdrop really boosts the style.
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Fifteen stocks hit the screen, and these five are rated Buy and look like great ideas now. Some may even get a seasonal boost. They all offer very good upside potential. While they definitely better suited for investors with a touch more risk tolerance, it is still important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Denali Therapeutics
This stock is way off of its 52-week high and is a solid biotech idea for investors. Denali Therapeutics Inc. (NASDAQ: DNLI) is a biopharmaceutical company engaged in the development and commercialization of a portfolio of product candidates for neurodegenerative diseases. Its product pipeline includes LRRK2, RIPK1, TREM2 and Tau.
The company announced last week that the U.S. Food and Drug Administration (FDA) has granted fast-track designation to ETV:IDS, a treatment for patients with Hunter syndrome. Denali said the designation may allow for early and frequent communication with the FDA regarding the development of the drug, and it also enables a rolling review, and potentially a priority review, of the marketing application.
The brain-penetrant enzyme replacement therapy is being evaluated in a Phase 1/2 study in patients with Hunter syndrome as a potential treatment for both central nervous system and peripheral manifestations of the disease.
Jefferies has an $95 price target on the shares, and the Wall Street consensus target is $81.00. Friday’s final print was $62.01 per share.
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Floor and Decor Holdings
Jefferies continues to view this company as a beneficiary of the move to the suburbs by city dwellers. Floor and Decor Holdings Inc. (NYSE: FND) is a multichannel specialty retailer operating 133 warehouse-format stores and two design centers across 31 states at the end of the fourth quarter of fiscal 2020.
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The company offers a broad assortment of in-stock hard-surface flooring, including tile, wood, laminate/luxury vinyl plank, and natural stone, along with decorative and installation accessories, at everyday low prices.
Many on Wall Street wonder how much consumer spending will shift in a reopening, whether demand at pandemic winners is sustainable, how e-commerce will help the big get bigger, about the ability of companies with strong balance sheets to weather changes and about wild cards, from higher freight rates to gasoline prices. Floor & Decor is expected to weather all these challenges well.
The Jefferies price target is $111, while the posted consensus target is $110.50. The stock closed trading on Friday at $97.61 a share.
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Lattice Semiconductor
This stock was hit recently and is offering investors a great entry point. Lattice Semiconductor Corp. (NASDAQ: LSCC | LSCC Price Prediction) designs, develops and markets programmable logic products and related software. Its products include semiconductor devices, evaluation boards, development hardware, and related intellectual property licensing, services and sales.
The company provides smart connectivity solutions powered by its low power FPGA, video ASSP, millimeter wave, and IP products to the consumer, communications, industrial, computing and automotive markets. The company recently launched the latest version of its award-winning solutions stack for low-power embedded vision systems, Lattice mVision 2.0. The new version features multiple updates that further accelerate the design of embedded vision applications for industrial, automotive, medical and smart consumer systems.
Lattice Semiconductor also includes support for popular new image sensors used in industrial and automotive systems and a new image signal processing IP core and reference design to help developers design smart vision applications at the Edge. The stack also includes support for the Lattice Propel design environment to simplify development of vision systems with an embedded RISC-V processor.
The $56 Jefferies price objective compares to the $50.60 consensus target price. Lattice Semiconductor stock was last seen at $44.47 on Friday.
Realty Income
This is an ideal midcap stock for growth and income investors looking for a safer idea for 2021. Realty Income Corp. (NYSE: O) is an S&P 500 company dedicated to providing stockholders with dependable monthly income. The company is structured as a real estate investment trust (REIT), and its monthly dividends are supported by the cash flow from over 6,500 real estate properties owned under long-term lease agreements with commercial tenants.
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To date, the company has declared 604 consecutive common stock monthly dividends throughout its 51-year operating history and increased the dividend 108 times since its public listing in 1994, and it is a member of the S&P 500 Dividend Aristocrats index.
Investors receive a 4.57% distribution. The Jefferies team has set a $77 price objective. The $69.53 consensus price target is lower, but Realty Income stock closed at $61.75 a share on Friday.
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Yeti
This well-known maker of coolers and other camping items may get a seasonal boost as spring is here and summer not far behind. Yeti Holdings Inc. (NYSE: YETI) is a growing designer, marketer, retailer and distributor of a variety of innovative, branded, premium products to a wide-ranging customer base.
The company is determined to ensure that each Yeti product delivers exceptional performance and durability in any environment, whether in the remote wilderness, at the beach, or anywhere else. By consistently delivering high-performing products, Yeti has built a following of engaged brand loyalists throughout the United States, Canada, Japan, Australia and elsewhere, ranging from serious outdoor enthusiasts to individuals who simply value products of uncompromising quality and design.
The Jefferies price target is $100. The consensus target on Yeti stock is $82.46, and Friday’s closing share price was $75.03.
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These five top stocks with plenty of upside to the Jefferies price targets are trading well below 52-week highs. These all make sense for investors looking to add small- and mid-cap exposure to long-term growth portfolios. Again, most of these outstanding companies are better suited for growth stock investors with a slightly higher risk tolerance
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