When many investors think of “momentum” plays, they think of the FANG stocks, those large cap technology leaders that have dominated for the last couple of years. But there is another area to look for solid momentum plays, and that is in the small to mid-cap arena, or SMID as it is now referred to on Wall Street. While better suited for more aggressive accounts, there is some great companies in this group, and they make sense in a bloated market.
An outstanding new report from Steven DeSanctis, the SMID strategist at Jefferies, features numerous top themes to screen for stocks. He also added momentum into the mix, and noted this:
After reviewing our factor performance for small caps we noticed that momentum (price) was making a nice comeback. It has been out of favor for quite some time and we think the rally by these factors have some legs. Thus our eighth theme is now go with the Mo’, as price momentum will drive performance.
24/7 Wall St. screened the 15 stocks that fit all the themes, including momentum, and found five that look especially solid now. All are rated Buy at Jefferies.
This company has always done a job on short sellers, and it may be primed for a good run higher. Deckers Outdoor Corp. (NYSE: DECK) is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high-performance activities.
The company’s portfolio of brands includes UGG, Teva, Sanuk, Ahnu, HOKA ONE ONE and Koolaburra. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 154 company-owned and operated retail stores, and select online stores, including company-owned websites.
The Jefferies price target for the stock is $74, and the Wall Street consensus price objective is just $65.50. Shares closed Monday at $60.84.
This is another top Jefferies pick. IAC/InterActiveCorp (NASDAQ: IAC) operates a diverse collection online media assets, with Ask.com search and Match.com personals driving the bulk of its revenue and profits. IAC generates revenue from a combination of advertising (both search and display), subscriptions and transactions.
Top analysts have cited the merger between Angie’s List and IAC/InterActiveCorp Home Adviser. After two years of wooing, Angie’s List has finally agreed to be acquired by IAC. After the deal closes, Angie’s List will combined with HomeAdvisor, IAC’s home services marketplace, into a new public company called ANGI Homeservices.
Jefferies has a $134 price target, and the consensus target is $128.28. The stock closed on Monday at $141.62.
Maxim Integrated Products
This company supplies some chips to Samsung for the red-hot Galaxy line. Maxim Integrated Products Inc. (NASDAQ: MXIM) designs, develops, manufactures and markets various linear and mixed-signal integrated circuits worldwide. The company also provides a range of high-frequency process technologies and capabilities for use in custom designs. It primarily serves automotive, communications and data center, computing, consumer and industrial markets.
Regardless of which processor wins supremacy in automotive segment over the next couple of years, Maxim stands poised to benefit with its Power Management and SERDES content as autonomous cars require leading power efficiency and data distribution. Moreover, the company should see a linear benefit with additional content needed for greater levels of autonomous-driving features in future generations of automobiles.
The $51 Jefferies price objective compares with the consensus posted at $47.96. Shares closed most recently at $47.30.
This pick may offer big upside potential. Oclaro Inc. (NASDAQ: OCLR) designs, manufactures and markets lasers and optical components, modules and subsystems for the optical communications, industrial and consumer laser markets worldwide.
The company’s products generate, detect, combine and separate light signals in optical communications networks. It offers client side transceivers, including pluggable transceivers; line side transceivers; tunable laser transmitters, such as discrete lasers and co-packaged laser modulators; lithium niobate modulators to manipulate the phase or the amplitude of an optical signal; transponder modules for transmitter and receiver functions; and discrete lasers and receivers for metro and long-haul applications.
Oclaro has a staggering 49% of total revenue generated from datacom. While the exposure could hurt in a downturn, the current positive momentum bodes well for the future.
Jefferies has set its price target at $12.50. The consensus target is $12.64, and shares closed Monday at $9.39.
Take-Two Interactive Software
This top video game producer has cashed in with some super-hot titles. Take-Two Interactive Software (NASDAQ: TTWO) offers its products under labels such as Rockstar Games and 2K. It develops and publishes action/adventure products under the Grand Theft Auto brand, as well as other franchises, including Civilization, Borderlands, Bioshock and Red Dead under the Rockstar Games label. The Grand Theft Auto franchise has been one of the best-selling video games ever released.
The sustained momentum for the GTA V franchise, including a record quarter for GTA Online, is the largest contributor to recurrent consumer spending (71% year over year and 58% of non-GAAP revenue). Based on the fiscal first-quarter beat and traction for its titles, management made material upward adjustments to fiscal 2018 guidance and continues to project record results in fiscal 2019.
The Jefferies price target is $108. The consensus price objective is $97.06, and shares closed Monday at $100.82.
These five high-quality SMID momentum plays could be solid choices for aggressive accounts to add for the upcoming fourth quarter. Again, with a pricey market and earnings coming, it might make sense to either scale in capital or have very tight sell stops, or both.