Great stocks that fly under the radar.
Some of the best-performing companies of the bull market have grown so big that their growth has understandably started to slow. While the big tech stocks and S&P 500 large-cap stocks get most of the headlines on Wall Street, there are plenty of small-cap stocks that are flying under the radar. Bank of America’s Endeavor List is a selection of high-value stocks with market caps under $7 billion that have exposure to many of the firm’s favorite long-term growth trends. Here are seven small-cap stocks that could generate big returns.
Air Lease Corp. (ticker: AL)
Air Lease leases a fleet of 271 owned and 49 managed aircraft around the world. In 2018, Air Lease has been focusing on reducing its debt load and reinvesting its tax cut savings. As of the end of June, Air Lease had committed to acquiring another 391 new aircraft for a price of around $28 billion. Analyst Kristine Liwag says Air Lease is currently in a period of rapid growth and high earnings visibility, which should produce upside for investors. Bank of America has a “buy” rating and $57 price target for AL stock.
Boyd Gaming Corp. (BYD)
Business has been booming for regional U.S. casino operator Boyd Gaming. It may not have any properties on the popular Las Vegas Strip, but Boyd owns 28 gaming facilities in Nevada and nine other states. Last month, Boyd completed a deal to acquire four additional casinos from Pinnacle Entertainment Group. Analyst Shaun Kelley says the combination of new property additions, improving margins, solid revenue growth and multiple expansion is a winning recipe for investors. Bank of America has a “buy” rating and $37 price target for BYD stock.
Ciena Corp. (CIEN)
Ciena is a vendor for ethernet switching and high-capacity optical transport equipment. The company specializes in modernizing and updating legacy communications networks. Analyst Tal Liani says 100G optical equipment spending is on the rise, and CIEN stock has an attractive valuation given the potential upside to the company’s data center business. In addition, Ciena is gaining market share from competitors, and its gross margin increased by 2.7 percent sequentially in the third quarter. Bank of America has a “buy” rating and $36 price target for CIEN stock.
CyrusOne is a data center real estate investment trust that owns 31 centers and serves more than 900 customers in the U.S., London and Singapore. CyrusOne’s core business is focused on Fortune 1000 companies, including energy sector clients in the Texas market. Analyst Michael Funk says demand for outsourced data center services will likely stay hot in the long term. In addition, he says CyrusOne’s high-quality assets and modest $5.9 billion market cap make it a potentially attractive acquisition in a consolidating industry. Bank of America has a “buy” rating and $75 price target for CONE stock.
The Greenbrier Companies (GBX)
The Greenbrier Companies make railroad freight cars and marine barges and provide fleet leasing and repair services for railcars in North America and Europe. International orders make up about 30 percent of Greenbrier’s business, but it is in talks to expand its international business. Greenbrier and the Saudi Railway Co. plan to invest $270 million developing railway infrastructure in Saudi Arabia. Analyst Ken Hoexter says the stock’s valuation is historically low and its earnings multiple should expand as the railroad market improves. Bank of America has a “buy” rating and $56 price target for GBX stock.
H&E Equipment Services (HEES)
H&E Equipment Services is one of the largest heavy equipment services companies in the U.S., providing cranes, earthmoving equipment, industrial lift trucks and other construction machinery. H&E management says the company is already seeing strong crane demand, and a potential U.S. infrastructure bill in 2019 could help drive the market. Analyst Ross Gilardi says improvements in non-residential and rental construction markets are bullish, and the stock’s 4.3 percent dividend is among the highest in its peer group. Bank of America has a “buy” rating and $32 price target for HEES stock.
Spirit Airlines (SAVE)
Spirit Airlines is a low-cost U.S. airliner with a fleet of about 100 planes. Unit revenue was up 5.5 percent in the third quarter, and Spirit beat expectations by guiding for 6 percent growth in revenue per available seat mile in the fourth quarter as well. Analyst Andrew Didora says Spirit’s unit revenues are still about 25 percent below their peak levels in prior cycles, and Spirit has non-fuel unit costs that are more than 20 percent lower than its peers. Bank of America has a “buy” rating and $57 price target for this airline stock.
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