Bank of America Believes These 14 Stocks Will Soar in the Economic Recovery
Typically, small-cap stocks perform better than large-cap stocks as the economy recovers from a recession. However, Bank of America strategist Jill Carey Hall believes valuations show that investors are being extremely cautious.
"Small-cap cyclical sectors do not appear to be pricing in the recovery, trading at/near record discounts to defensive sectors," she said. "With our economists' forecast for 6% US GDP growth (strongest since 1984), we see smaller stocks as a better way to invest in the economic rebound than larger stocks."
She believes the economy is already past the early stages of recovery which would bode well for underappreciated stocks. "Low Price has tended to outperform in small caps for ~16 mos. (and by ~50ppt) following market troughs (vs. outperformance for less than a year/~30ppt today, suggesting potential for further upside)," she said.
The following stocks are all in the top 20 percent of the Russell 2000 based on their sensitivity to US GDP:
- Rush Enterprises (RUSHA)
- Owens & Minor (OMI)
- Greif (GEF)
- Group 1 Automotive (GPI)
- Tenet Healthcare (THC)
- Hibbett Sports (HIBB)
- Urban Outfitters (URBN)
- Louisiana Pacific (LPX)
- Patterson (PDCO)
- Helix Energy Solutions Group (HLX)
- Retail Opportunity Investments (ROIC)
- Cracker Barrel Old Country Store (CBRL)
- UMB Financial (UMBF)
- ArcBest (ARCB)