Financial institution of America analyst Jill Carey Corridor highlighted 28 Purchase-rated “high quality” small cap shares within the Russell 2000 index (RTY), with 20 of them on the “development” benchmark.
“High quality is often one of many most-rewarded types throughout Late Cycle regimes/Fed mountain climbing cycles, the Russell 2000 Development has turn into decrease high quality than ever (45% non-earners),” the analyst wrote in a notice to purchasers final week. In the meantime, Russell 2000 development shares (NYSEARCA:IWF) now look “traditionally low cost” compared with Russell 2000 worth (NYSEARCA:IWD), the analyst highlighted. Yr-to-date, IWF falls almost 13% and IWD is down virtually 4%, based on the chart right here.
Total, BofA screened Russell 2000 shares for prime quality, these within the high quintile on a minimum of one of many cyclical development components that fare effectively within the late cycle, high quintile by working margin or margin growth Y/Y, and is Purchase-rated by a BofA elementary analyst.
BofA’s concepts for Russell 2000 shares that rank within the high quintile on free money flow-based worth metrics embody:
- Funko (NASDAQ:FNKO). Client Discretionary (NYSEARCA:XLY). Development.
- Sonos (NASDAQ:SONO). Client Discretionary (XLY). Development.
- Group 1 Automotive (NYSE:GPI). Client Discretionary (XLY). Worth.
- Asbury Automotive Group (NYSE:ABG). Client Discretionary (XLY). Development.
- Academy Sports activities and Open air (NASDAQ:ASO). Client Discretionary (XLY). Worth.
- Chesapeake Power (NASDAQ:CHK). Power (NYSEARCA:XLE). Development + worth.
- California Assets (NYSE:CRC). Power (XLE). Worth.
- Alector (NASDAQ:ALEC). Well being Care (NYSEARCA:XLV). Development.
- Tenet Healthcare (NYSE:THC) Well being Care (XLV). Development + worth.
- ArcBest Corp (NASDAQ:ARCB). Industrials (NYSEARCA:XLI). Worth.
- Rush Enterprises (NASDAQ:RUSHA). Industrials (XLI). Worth.
- Boise Cascade (NYSE:BCC). Industrials. Development + worth.
- O-I Glass (NYSE:OI). Supplies (NYSEARCA:XLB). Development.
The remainder of BofA’s Purchase-rated concepts are:
- KB Dwelling (NYSE:KBH). Client Discretionary (XLY). Development + worth.
- Revolve (NYSE:RVLV). Client Discretionary (XLY). Development + worth.
- Callaway Golf (NYSE:ELY). Client Discretionary (XLY). Worth.
- Duckhorn Portfolio (NYSE:NAPA). Client Staples (NYSEARCA:XLP). Development + worth.
- Owens & Minor (NYSE:OMI). Well being Care (XLV). Development + worth.
- Possibility Care Well being (NASDAQ:OPCH). Well being Care (XLV). Worth.
- Progyny (NASDAQ:PGNY). Well being Care (XLV). Development.
- AMN Healthcare Providers (NYSE:AMN). Well being Care (XLV). Development.
- Meritor (NYSE:MTOR). Industrials (XLI). Development + worth.
- Saia (NASDAQ:SAIA). Industrials (XLI). Development.
- Veritiv (NYSE:VRTV). Industrials (XLI). Worth.
- H&E Tools Providers (NASDAQ:HEES). Industrials (XLI). Development.
- TTEC Holdings (NASDAQ:TTEC). Data Tech (NYSEARCA:XLK). Development.
- MACOM Tech. Options (NASDAQ:MTSI). Data Tech. Development.
- MP Supplies (NYSE:MP). Supplies (XLB). Development.
Moreover, BofA discovered that each worth and high quality issue types had been essentially the most alpha-generative throughout prior Fed mountain climbing cycles since 1989, whereas “threat” was the worst performing model. The performances had been based mostly on median long-short annualized value efficiency of every issue group.
In mid-February, BofA’s survey signaled the Fed would step in to assist fairness markets if the S&P fell to three.7K.