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BofA analysts project that small- and mid-cap stocks will exceed expectations in 2024. However, they urge caution, advising that owning the Russell 2000 (IWM) outright carries more risk today due to an increased proportion of non-earners and stocks with refinancing risk compared to historical trends.
Despite these warnings, they identify several potential opportunities arising from factors such as bottoming corporate profit growth, forthcoming Fed rate cuts, and positive macro indicators, including an ISM rebound.
Analysts point to data that suggests a rebound in ISM manufacturing activity.
In a BofA Securities Small and Mid-cap Strategy report, analysts conducted a screening for Russell 2500 (BATS:SMMD) stocks with the highest combined beta and correlation with the ISM, based on monthly performance. This involved comparing changes in the ISM since 1970 and excluding stocks with less than 30 years of data.
The report identified the following Russell 2500 (SMMD) stocks with the highest beta and correlation to changes in the ISM as of Feb. 14:
- SITE Centers Corp. (SITC) – Correlation: 21%
- LXP Industrial Trust (LXP) – Correlation: 19%
- Albany International Corp. Class A (AIN) – Correlation: 17%
- Trinity Industries Inc. (TRN) – Correlation: 16%
- CTS Corp. (CTS) – Correlation: 16%
- Barnes Group Inc. (B) – Correlation: 15%
- Marten Transport Ltd. (MRTN) – Correlation: 16%
- Urban Outfitters Inc. (URBN) – Correlation: 17%
- Worthington Enterprises Inc. (WOR) – Correlation: 15%
- MillerKnoll Inc. (MLKN) – Correlation: 15%
- Signet Jewelers Limited (SIG) – Correlation: 17%
- ATI Inc. (ATI) – Correlation: 16%
- Xerox Holdings Corp. (XRX) – Correlation: 15%
- Carpenter Technology Corp. (CRS) – Correlation: 14%
- Benchmark Electronics Inc. (BHE) – Correlation: 15%
- Interface Inc. (TILE) – Correlation: 16%
- Wabash National Corp. (WNC) – Correlation: 16%
- Apogee Enterprises Inc. (APOG) – Correlation: 14%
- ArcBest Corp. (ARCB) – Correlation: 15%
- LCI Industries (LCII) – Correlation: 14%
- Titan International Inc. (TWI) – Correlation: 14%
- Gentherm Inc. (THRM) – Correlation: 14%
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