Merrill Lynch Makes Changes to SMID-Cap Alpha List for Q2

Since bottoming out back in October, the Russell 2000 has been on fire, and many investors have rotated portfolio allocations back to the index. Typically the small and mid-cap stocks perform well in times of a strong dollar, and the move this cycle has been no exception. A new research report from the analysts at Merrill Lynch includes some timely additions to the firm’s SMID-Cap Alpha list, which consists of long and short ideas on stocks of companies with market caps between $1 billion and $5 billion.

In the new report, the Merrill Lynch team swaps out Dyax Corp. (NASDAQ: DYAX), which keeps its rating of Buy, for PTC Therapeutics Inc. (NASDAQ: PTCT). They also add back Swift Transportation Co. (NYSE: SWFT), as the analyst covering the stock has a positive view on the truckload market, which should benefit from years of improved pricing.

We also screened the list of the top technology stocks that currently make the cut. They are Take-Two Interactive Software Inc. (NASDAQ: TTWO), Tessera Technologies Inc. (NASDAQ: TSRA) and Ubiquiti Networks Inc. (NASDAQ: UBNT).

Take-Two Interactive Software

This top video game producer has cashed in with some super hot titles. The company offers its products under the labels such as Rockstar Games and 2K. It develops and publishes action/adventure products under the Grand Theft Auto brand, as well as other franchises, including L.A. Noire, Max Payne, Midnight Club and Red Dead, under the Rockstar Games label. The Grand Theft Auto franchise has been one of the best-selling video games ever released.

The Merrill Lynch price target for the stock is $36, and the Thomson/First Call consensus price target is $33.56. The stock closed trading on Friday at $25.26 a share.

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Tessera Technologies

Tessera Technologies and its subsidiaries license technologies and intellectual property to customers and others who implement them for use in areas such as mobile computing and communications, memory and data storage, and 3DIC technologies. The company’s technologies include semiconductor packaging and interconnect solutions, and products and solutions for mobile and computational imaging, including our FaceTools, FacePower, FotoSavvy, DigitalAperture, face beautification, red-eye removal, High Dynamic Range, autofocus, panorama and image stabilization intellectual property.

Tessera investors are paid a 2% dividend. Merrill Lynch has a price objective of $50 for the stock, while the consensus target is slightly higher at $51.25. The stock closed Friday at $39.90 a share.

Ubiquiti Networks

Ubiquiti Networks recently announced what it calls a revolutionary new platform for the global last-mile wireless industry called airFiber X. Purpose-built from the ground up, airFiber X is a rugged outdoor point-to-point radio platform designed for the global unlicensed frequency bands. The company provides a wide assortment of networking products and solutions for service providers and enterprises in the United States and internationally.

Merrill Lynch has a $40 price target, and the consensus is set at $35.79. Shares closed the trading day Friday at $29.17.

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While the Merrill Lynch SMID-Alpha stock picks may have a higher volatility than the benchmark, they are also designed for more aggressive growth accounts. These stocks are a good fit in a long-term portfolio, and with the dollar strength expected to remain intact, they are a good domestic play as well.