The stronger the U.S. dollar becomes against foreign currencies, the more investors need to look at the small- and mid-cap stocks. Typically much of their core business is domestic in orientation, and they don’t need to export large amounts of goods and services to be profitable. Strategists at Deutsche Bank A.G. (NYSE: DB) feel that the lows in the market should be hit by mid-July, with the S&P 500 trading perhaps as low as 1,525. Now may be the time to sell high-dividend stocks and look at small cap and mid-cap stocks to take the summer heat off investor portfolios.
Here are the top small- and mid-cap names to bsy at Deutsche Bank.
Pier One Imports Inc. (NYSE: PIR) is a top retail name to buy. Benefiting from a strong domestic housing recovery, the retailer raised its full-year EPS guidance to a range of $1.27 to $1.32, up from $1.26 to $1.31 previously. Same-store sales rose 5.9%, thanks to stronger store traffic and higher average tickets. Deutsche Bank has a $28 price target on the stock. The Thomson/First Call estimate is at $27. Investors are paid a small 0.9% dividend.
Dick’s Sporting Goods Inc. (NYSE: DKS) is another top retailer to make the Deutsche Bank list of stocks to buy. Dick’s Sporting Goods is the largest full-line sporting goods retailer in the United States today. With 520 namesake stores to go along with 81 Golf Galaxy stores, it has established quite a national footprint. Deutsche Bank has a $57 price target, while the consensus target is even higher at $59. Investors are paid a 1.0% dividend.
Energizer Holdings Inc. (NYSE: ENR) is a mid-cap consumer staples name to make the list. Energizer stepped up its investor relations efforts by organizing quarterly conference calls and providing annual financial outlook. Energizer has been rewarded for its efforts with a 34% increase in its share price for the past 12 months. Trading at 1.22 times price-to-earnings growth (PEG), Energizer is cheap relative to its peers. Deutsche Bank agrees and has a $110 price target, thought the consensus estimate is $105. Investors are paid a 1.6% dividend.
Oceaneering International Inc. (NYSE: OII) is a quality energy name on the Deutsche Bank list of stocks to buy. The company specializes in deepwater applications for the oil and gas industry. The company services this segment via remotely operated vehicles, built-to-order specialty subsea hardware and deepwater intervention and manned diving services. Deutsche Bank has a $96 price target, and the consensus target is much lower at $75. Investors receive a 1.2% dividend. The Deutsche Bank target price is the highest on Wall Street, and investors would see gains of 35% if the target is hit.
IAC/InteractiveCorp. (NASDAQ: IACI) operates as a media and Internet company in the United States and internationally. Its Search & Applications segment operates Websites to provide search services and content, such as Ask.com, About.com and Dictionary.com. The company’s Match segment provides subscription-based and ad-supported online personals services through its Websites, such as Match.com, Chemistry.com, OurTime.com, BlackPeopleMeet.com and OkCupid.com, as well as through Meetic-branded Websites and mobile applications. Deutsche Bank has a $62 price objective, while the consensus is at $58. Investors are paid a 2.0% dividend.
Alaska Air Group Inc. (NYSE: ALK) has an aggressive expansion strategy that has yielded substantial results. From a valuation standpoint, the company trades with a price-to-earnings ratio of 12.6, compared to the industry average of 31.9. It is not uncommon to see airlines submerged in debt, but Alaska Air Group has a lower-than-average debt-to-earnings ratio at 0.6. The Deutsche Bank price target for this top airline name is $70, the same as the consensus target. A move to the price target would represent a 30% increase for investors.
WNS Holdings Ltd. (NYSE: WNS) is a top small cap name to buy. The company announced last week it will continue to provide a comprehensive range of services across sales and customer care, operations and shared services, including revenue management, revenue accounting, cargo operations, customer relations, data management, information security, human resources services for British Airways. Deutsche Bank has a $19 price objective, but the consensus is lower at $16.50.
With the market continuing to sell off and the dollar surging against other currencies, investors who have not taken gains from the big run up may want to now. While the second half of the year looks positive, second-quarter earnings may not be. We have recommended for some time that investors carefully buy stock at these levels. We continue to preach the same discipline.