Jefferies picks a baker's dozen of top small and midcap stocks
Vladimir Zakharov
The seasonal pullback in stocks overall and small-cap in particular came early this year, according to the Jefferies equity team. But they are sticking with their year-end target.
"Recently, we've seen smaller cuts to '23 earnings growth estimates compared to the start of year, and the earnings & sales revision ratios have turned up," strategist Steven DeSanctis said. "Across our macro factors, only the stronger dollar (DXY) hurts small, but HY spreads (HYG) (JNK) reached their tightest levels YTD ... while higher rates for the right reason, and better growth tend to be good for small."
He predicts the Russell 2000 (RTY) (NYSEARCA:IWM) will end 2023 at 1,975.
"We decided to lean on our favorite factors to find attractive Buy-rated SMID-Cap names," DeSanctis said. "Stocks needed to look attractive on FCF Yield, have an improving ROE over the last year, maintain a clean balance sheet, rank well on the 1-month change in the 200-day moving average, as well as look attractive on the 1-month change in FY1 EPS."
"After all that, we came up with 13 Buy-rated ideas."

Electronic Arts (EA)
Steve Madden (SHOO)
Civitas Resources (CIVI)
Unum Group (UNM)
Builder's FirstSource (BLDR)
Owens Corning (OC)
Lincoln Electric (LECO)
Textron (TXT)
Timken (TKR)
Teledyne (TDY)
MACOM Technology (MTSI)
Onto Innovation (ONTO)
Zillow Group (Z)


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