For the better part of the past two years, Wall Street strategists from many of the firms we cover have stressed to their clients to stick with the large- and mega-cap stocks. The reasoning was solid, as typically those stocks are the safest from a volatility standpoint and have the most liquidity. The strategy has been a good one as the large-cap leaders have done well, especially in technology.
The Credit Suisse team, in a new report, says investors may want to look at the top mid-cap companies to own. They are also advising clients to avoid come of the popular and over-owned stocks. In fact, within the Russell Midcap Index, the least popular names in mid-cap funds have experienced the best performance so far in 2014. In 2012 and 2013, the best performing Russell mid-cap stocks were found among the middle tiers of ownership.
Investors who realize they have a portfolio stuffed with mega-cap stocks may want to consider taking some profits or discarding some of the losers, if you follow their strategy. Adding big mid-cap companies keeps a level of safety in a solid growth portfolio and may add some alpha to beat the market, as many of the stocks are under-followed.
We screened the Credit Suisse research report for the top new ideas to own by sector. Here are the stocks rated Outperform.
Alliant Techsystems Inc. (NYSE: ATK) is a top defense stock rated Outperform at Credit Suisse. The company is a world-leading producer of ammunition, precision weapons and rocket motors. It announced Monday that it has received international contracts totaling more than $220 million from U.S. allies for medium-caliber cannons and aftermarket services that will support cannon system integration and product life cycle.
Alliant investors are paid a 1% dividend. Credit Suisse has a $177 price target on the stock. The Thomson/First Call consensus price target is at $154.44. The stock closed Tuesday at $134.69 a share.