Jefferies Out With Top Small Cap Growth Picks for 2019

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It’s that time of year again, the time when all the top firms that we cover here at 24/7 Wall St. start to make their stock picks and prognostications for 2019. This not only gives investors a bit of a head start on year-end portfolio reshuffling, but it also gives them a look at what the overall macro thoughts for the coming year are at the big brokerages and banks.

The relentless selling in the markets that started in early October has shaken the faith of many investors, despite the big rally on Wednesday, but it remains important to remember that we have enjoyed an almost 10-year bull market run, with the S&P 500 running to 2,940 from an intraday low in March of 2009 of 666. This current backup should give investors a chance with some dry powder to reset and buy some great companies.

In a new Jefferies research report, the firm’s top flight equity strategist, Steven DeSanctis, is out with 19 ideas for 2019 that screen extremely well. Here’s what the report outlined:

Steven remains more positive than most of the clients he has spoken with, though he thinks a first quarter reporting season rebound is the most likely near term rally. Steven highlighted that revision trends have stopped declining and have finally started to reverse and turn up. Steven reiterated his preference for Growth over Value stocks going forward and screened the Russell 3000 for Buy-rated stocks between $2 billion and $30 billion market cap that are expected to see double-digit revenue growth over the next 2 years and have return on equity of>10%, debt to capital of <50% and foreign sales less than 25%.

Of the 19 top picks in the report, five are highlighted as top selections, and all are rated Buy at Jefferies.

Abiomed

Many on Wall Street feel this top company has virtually no competition in its space. Abiomed Inc. (NASDAQ: ABMD) engages in the research, development and sale of medical devices to assist or replace the pumping function of the failing heart. It also provides continuum of care to heart failure patients.

The company offers Impella 2.5 catheter, a percutaneous micro heart pump with integrated motor and sensors for use in interventional cardiology; Impella CP that provides partial circulatory support using an extracorporeal bypass control unit; Impella 5.0 catheter and Impella LD, which are percutaneous micro heart pumps with integrated motors and sensors for use primarily in the heart surgery suite; and Impella RP, a percutaneous catheter-based axial flow pump.

The Jefferies price target for the shares is $460, and the consensus target is $446.10. The stock closed Wednesday at $307.44.

Diamondback Energy

This top Permian Basin play for more aggressive accounts was absolutely eviscerated in the sell-off. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company headquartered in Midland, Texas, and focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas.

Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork and Cline formations.

Wall Street analysts have noted in the past the company’s top-tier asset base, solid accretive additions and financial discipline, which they think allows for not only continued solid cash flow, but could put the company in play as a takeover target. Diamondback continues to drill some of the most economical wells in the United States as efficiencies improve, costs decrease and activity remains in the better regions.

Jefferies has a price target of $158, and the consensus target is $153.27. The shares closed Wednesday at $91.99.