BANK OF AMERICA: Buy these 34 high-returning but lesser-known stocks because economic trends show they're the best bet for outperformance

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Bank of America says the economy might already be entering the last stage of the post-COVID cycle.
Strategist Jill Carey Hall says "quality" small- and mid-cap stocks thrive in late-cycle conditions.
Since 1990, they've outperformed 100% of the time during the last phase of an expansion, she says.
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There's something of a consensus forming on Wall Street that says investors should take a good, long look at "quality" stocks.

The market seems to have shaken off its fear that Chinese real estate lender Evergrande was going to be the start of a global debt crisis. But even so, there's been a rising sense of nervousness in the market in recent weeks as experts note how long it's been since stocks sold off in a major way - even though time alone doesn't make those sales happen.

Investors' worries about a downturn have prompted them to buy companies that have a history of low debt, financial health, steady earnings, and stable profits on the theory that company performance and stock performance will hold up better if things go south.

Goldman Sachs recently pointed out some of its large-cap quality picks, and now Bank of America is doing the same for smaller- and medium-size companies. Equity and quant strategist Jill Carey Hall writes that that call makes sense because of economic conditions as well as that undercurrent of investor nerves.

"Our team's US Regime Indicator - which has continued advancing through "Mid-Cycle" throughout 2021 - ticked down in August," she wrote on Wednesday. "If it declines again in Sept., this would suggest a shift to Late Cycle."

Among those small- and mid-cap companies, Carey Hall says that investing based on quality has an incredible track record.

"High Quality stocks have outperformed the equal-weighted Russell 2000 index 100% of the time in Late Cycle regimes since 1990," she wrote. The two best quality factors are return on capital and free cash flow return on assets.

The stocks below all have "Buy" ratings from Bank of America's analysts, and they're among the top 20% of Russell 2000 stocks in one of those two categories, which suggests they'll do well in the late-cycle environment Carey Hall identified.

A select few stocks rank in the top quintile in both factors. Those are Rent-A-Center, RH, Cactus, HealthEquity, TTEC, and Enphase.

Fox Factory

Ticker: FOXF

Sector: Consumer discretionary

Industry: Auto components

Market cap: $6.3 billion

Source: Bank of America

Funko

Ticker: FNKO

Sector: Consumer discretionary

Industry: Distributors

Market cap: $715 million

Source: Bank of America

Churchill Downs

Ticker: CHDN

Sector: Consumer discretionary

Industry: Hotels, restaurants, & leisure

Market cap: $9.0 billion

Source: Bank of America

Sonos

Ticker: SONO

Sector: Consumer discretionary

Industry: Household durables

Market cap: $4.6 billion

Source: Bank of America

Shutterstock

Ticker: SSTK

Sector: Consumer discretionary

Industry: Internet & direct marketing retail

Market cap: $4.3 billion

Source: Bank of America

PROG Holdings

Ticker: PRG

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $2.8 billion

Source: Bank of America

America's Car-Mart

Ticker: CRMT

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $793 million

Source: Bank of America

Asbury Automotive Group

Ticker: ABG

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $3.6 billion

Source: Bank of America

Bed Bath & Beyond

Ticker: BBBY

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $2.5 billion

Source: Bank of America

Hibbett

Ticker: HIBB

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $1.2 billion

Source: Bank of America

Lithia Motors

Ticker: LAD

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $10.2 billion

Source: Bank of America

Rent-A-Center

Ticker: RCII

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $4.1 billion

Source: Bank of America

Ticker: RH

Sector: Consumer discretionary

Industry: Specialty retail

Market cap: $14.4 billion

Source: Bank of America

BJ's Wholesale Club Holdings

Ticker: BJ

Sector: Consumer staples

Industry: Food & staples retailing

Market cap:

Source: Bank of America

Cactus

Ticker: WHD

Sector: Energy

Industry: Energy equipment & services

Market cap: $1.9 billion

Source: Bank of America

Northern Oil and Gas

Ticker: NOG

Sector: Energy

Industry: Oil, gas, & consumable fuels

Market cap: $1.2 billion

Source: Bank of America

Arena Pharmaceuticals

Ticker: ARNA

Sector: Healthcare

Industry: Biotechnology

Market cap: $3.7 billion

Source: Bank of America

MeiraGTx Holdings

Ticker: MGTX

Sector: Healthcare

Industry: Biotechnology

Market cap: $592 million

Source: Bank of America

Vanda Pharmaceuticals

Ticker: VNDA

Sector: Healthcare

Industry: Biotechnology

Market cap: $932 million

Source: Bank of America

AMN Healthcare Services

Ticker: AMN

Sector: Healthcare

Industry: Healthcare providers & services

Market cap: $5.4 billion

Source: Bank of America

HealthEquity

Ticker: HQY

Sector: Healthcare

Industry: Healthcare providers & services

Market cap: $5.2 billion

Source: Bank of America

R1 RCM

Ticker: RCM

Sector: Healthcare

Industry: Healthcare providers & services

Market cap: $6.0 billion

Source: Bank of America

Allegiant Travel

Ticker: AGLT

Sector: Industrials

Industry: Airlines

Market cap: $3.6 billion

Source: Bank of America

Construction Partners

Ticker: ROAD

Sector: Industrials

Industry: Construction & engineering

Market cap: $1.7 billion

Source: Bank of America

Generac Holdings

Ticker: GNRC

Sector: Industrials

Industry: Electrical equipment

Market cap: $27.9 billion

Source: Bank of America

Meritor

Ticker: MTOR

Sector: Industrials

Industry: Machinery

Market cap: $1.5 billion

Source: Bank of America

ASGN

Ticker: ASGN

Sector: Industrials

Industry: Professional services

Market cap: $6.0 billion

Source: Bank of America

ArcBest

Ticker: ARCB

Sector: Industrials

Industry: Road & rail

Market cap: $1.9 billion

Source: Bank of America

Werner Enterprises

Ticker: WERN

Sector: Industrials

Industry: Road & rail

Market cap: $3.2 billion

Source: Bank of America

Rush Enterprises

Ticker: RUSHA

Sector: Industrials

Industry: Trading companies & distributors

Market cap: $2.4 billion

Source: Bank of America

TTEC Holdings

Ticker: TTEC

Sector: Information technology

Industry: IT services

Market cap: $4.4 billion

Source: Bank of America

Enphase Energy

Ticker: ENPH

Sector: Information technology

Industry: Semiconductors & semiconductor equipment

Market cap: $21.3 billion

Source: Bank of America

Louisiana-Pacific

Ticker: LPX

Sector: Materials

Industry: Paper & forest products

Market cap: $5.7 billion

Source: Bank of America

Newmark Group

Ticker: NMRK

Sector: Real estate

Industry: Real estate management & development

Market cap: $2.7 billion

Source: Bank of America

Read the original article on Business Insider

source https://www.businessinsider.com/stock-picks-buy-top-quality-small-mid-cap-investing-bofa-2021-9

BANK OF AMERICA: Buy these 34 high-returning but lesser-known stocks because economic trends show they're the best bet for outperformance

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