BofA/Merrill Lynch Top Five Small-Cap Alpha Stocks in the Russell 2000 (QCOR, ALK, ABFS, VHS, LEAP)
Bank of America Corp. (NYSE: BAC) has released a Small-Cap Alpha Surprise list from Merrill Lynch of small-cap stocks from the Russell 2000 for March. Of the 23 picks, eight were in health care, six were in discretionary spending, five were industrials and only two were in information technology. The team picked these out based on an “Alpha Surprise Score” with 1 being the most attractive, and the list’s ranking goes from 1.50 to 2.75.
The list screens for inexpensive stocks that are outside of consensus favor and stock ideas that use the Merrill Lynch fundamental equity analyst earnings estimate models, but it excludes real estate investment trusts and master limited partnerships. This screening effort also looks for stocks that have low valuations with above-street consensus earnings estimates. The long and short of it is that Bank of America is looking for a small-cap value investing stock screen of sorts.
We have selected the five highest rated picks in the Merrill Lynch universe, based on the best Alpha Surprise Score, all of which have Buy ratings by the firm. They are as follows.
Questcor Pharmaceuticals Inc. (NASDAQ: QCOR) is at $32.32, with a 1.50 Alpha Surprise Score in health care and pharmaceuticals by Steven Byrne. The price target is $40.00, but the Thomson Reuters target is $45.38. Questcor’s ‘s 52-week range is $17.25 to $58.91.
Alaska Air Group Inc. (NYSE: ALK) is at $57.03, with an Alpha Surprise Score of 1.50 in industrials (are airlines industrials?) by Glenn Engel. His price target is $60.00, but the Thomson Reuters consensus target is $57.50. Alaska Air’s 52-week range is $31.29 to $57.56.
Arkansas Best Corp. (NASDAQ: ABFS) is at $11.70, with an Alpha Surprise Score of 1.50 in industrials via road and rail by Ken Hoexter. His target is $14.00, but the Thomson Reuters target is all the way down at $11.25. Arkansas Best’s 52-week range is $6.43 to $19.50.
Vanguard Health Systems Inc. (NYSE: VHS) is at $15.77, with a 1.75 Alpha Surprise Score in health care providers by Kevin Fischbeck. His price target is $17.00, but the Thomson Reuters target is $16.27. Vanguard’s 52-week range is $6.92 to $15.85.
Leap Wireless International Inc. (NASDAQ: LEAP) is at $5.55, with an Alpha Surprise Score of 1.75 in telecom services and wireless by David Barden. His target price is $8.00 on the shares, but the Thomson Reuters consensus target is all the way down at $5.17. Leap Wireless’s 52-week range is $4.28 to $10.23.
Unfortunately, supporting data was not released on each in today’s screen. We selected data from the most recent call on each and compared these to Wall St. consensus target prices via Thomson Reuters.
The full list can be seen below: