Small-cap stocks are outperforming since Election Day.
The stock market has undergone some major shifts since Election Day. In addition to a broad market rotation out of high-growth tech stocks and into value stocks, small-cap stocks have also outperformed their larger peers in November. In fact, the Russell 2000 — which tracks about 2,000 small-cap U.S. stocks — is up almost 15% in the past month compared with about a 6% gain for the S&P 500. Investors seem to be betting that a rebounding economy in 2021 will give small-cap companies more of a boost than large-cap stocks. Here are eight Russell 2000 stocks to buy today, according to Bank of America.
Rocket Pharmaceuticals (ticker: RCKT)
Rocket Pharmaceuticals is a clinical-stage drug company that develops gene therapies for rare blood, bone, cardiac and other diseases. Analyst Greg Harrison says the data Rocket presented in October on its leukocyte adhesion deficiency-1 program was encouraging. Harrison says the program is a relatively small part of his bullish outlook for Rocket, but it represents an important validation of the company’s approach. Harrison says Rocket has several more catalysts ahead in the near future, including initial Danon disease Phase I data. Bank of America has a “buy” rating and $34 price target for RCKT stock.
Cal-Maine Foods (CALM)
Cal-Maine Foods is the largest producer of shell eggs in the U.S. Analyst Peter Galbo says the outlook for Southeast egg prices is positive given the layer flock is down about 5% from a year ago, and egg demand is elevated due to Americans eating at home. The holiday season is historically a strong period for egg prices as well. Galbo says Cal-Maine shares are attractively valued at around 1.75 times book value, a more than 20% discount to its long-term average. Bank of America has a “buy” rating and $47 price target for CALM stock.
Axonics Modulation Technologies (AXNX)
Axonics Modulation Technologies created a sacral neuromodulation system that uses electrical pulses to treat overactive bladder, fecal incontinence and urinary retention. Analyst Bob Hopkins says Axonics has experienced surgery cancellations during the 2020 health crisis, and new MRI-safe technology from Medtronic (MDT) has eliminated opportunities for Axonics to gain market share. However, Hopkins says Axonics’ third-quarter earnings beat increases his confidence that the company can outperform in 2021 and 2022, especially given analysts are anticipating virtually no improvement from third-quarter run rates next year. Bank of America has a “buy” rating and $59 price target for AXNX stock.
First BanCorp (FBP)
First BanCorp is the parent company of FirstBank Puerto Rico and FirstBank Insurance Agency. Analyst Ebrahim Poonawala says First BanCorp’s return on tangible common equity is trending in the right direction, approaching 10.75%. The company has excess cash representing more than 40% of its market cap, providing a safety net and financial flexibility. Finally, Poonawala says the outcome of the U.S. election should be bullish for the Puerto Rican economy. Poonawala is projecting annualized earnings per share of $1 by the second half of 2021. Bank of America has a “buy” rating and $10 price target for FBP stock.
Ping Identity Holding Corp. (PING)
Ping Identity is an identity access and management technology company. Analyst Tal Liani says Ping is facing a challenging environment of decelerating sales growth in the near term, but the company’s heavy cloud investments are positioning it well for future expansion. Liani is expecting growth to return to at least 15% in 2021, and new cloud products should help extend its growth runway. Liani is bullish on the identity access management market and says Ping has access to high-growth opportunities in both workforce and customer identity management. Bank of America has a “buy” rating and $32 price target for PING stock.
Sonic Automotive (SAH)
Sonic Automotive operates more than 120 U.S. auto dealerships. Analyst John Murphy says 2020 will likely mark the trough of the current auto market downturn, and Sonic’s EchoPark used vehicle business has already started to turn the corner. Murphy says potential operational challenges are already priced into the stock at current levels, and Sonic’s valuation is attractive. Low interest rates are a tailwind for Sonic as well, and the Federal Reserve has suggested interest rates will remain near 0% until at least 2023. Bank of America has a “buy” rating and $54 price target for SAH stock.
Y-mAbs Therapeutics (YMAB)
Y-mAbs Therapeutics is a biotechnology company developing immunotherapies for rare pediatric brain cancers. Analyst Alec Stranahan says Y-mAbs has less risk than other pivotal-stage biotech stocks because it has two drugs undergoing trials. So far, both drugs have demonstrated impressive efficacy and safety, and Stranahan says Y-mAbs has multiple potential bullish catalysts ahead in the near term. The biggest catalyst is the Prescription Drug User Fee Act date for naxitamab on Nov. 30. Stranahan says Y-mAbs has enough cash to fund operations through the end of 2022. Bank of America has a “buy” rating and $52 price target for YMAB stock.
Owens & Minor (OMI)
Owens & Minor is one of the largest U.S. distributors of medical and surgical supplies. Analyst Michael Cherny says Owens reported upside across the board in the most recent quarter. Personal protective equipment sales are driving the company’s outperformance, but Cherny says investors should not overlook the value created via improvements in client services, internal infrastructure and sourcing. Cherny says the biggest question in the long term is whether product demand is sustainable, but there are no signs of a slowdown anytime soon. Bank of America has a “buy” rating and $31 price target for OMI stock.
Put these Russell 2000 stocks on your plate:
— Rocket Pharmaceuticals (RCKT)
— Cal-Maine Foods (CALM)
— Axonics Modulation Technologies (AXNX)
— First BanCorp (FBP)
— Ping Identity Holding Corp. (PING)
— Sonic Automotive (SAH)
— Y-mAbs Therapeutics (YMAB)
— Owens & Minor (OMI)
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