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Bank of America says buy these 14 cheap stocks that are best positioned to soar on the strongest economic comeback in nearly 40 years

Published by Business Insider on Sun, 21 Feb 2021


<p><img src="https://static2.businessinsider.com/image/601d5a3890dd450018a7b0ed-1024/GettyImages-1077050374.jpg" border="0" alt="Traders and financial professionals work on the floor of the New York Stock Exchange" data-mce-source="Drew Angerer/Getty Images" data-mce-caption="Traders and financial professionals work on the floor of the New York Stock Exchange" data-link="https://www.gettyimages.co.uk/detail/news-photo/traders-and-financial-professionals-work-on-the-floor-of-news-photo/1077050374'adppopup=true"></p><p></p><bi-shortcode id="summary-shortcode" data-type="summary-shortcode" class="mceNonEditable" contenteditable="false">Summary List Placement</bi-shortcode><p>While investors have piled into <a href="https://www.businessinsider.com/stock-picks-to-buy-best-small-cap-growth-thesis-rbc-2021-2">small-company stocks</a> at a furious pace over the last couple of months, in some ways they're surprisingly hesitant.</p><p>Historically, those smaller stocks have tended to do better than larger ones as the economy comes out of recession and a new bull market begins. That's been the case lately, but Bank of America strategist Jill Carey Hall says valuations show that many investors are taking an overly cautious approach.</p><p>"Small cap cyclical sectors&nbsp;do not appear to be pricing in the recovery, trading at/near&nbsp;record discounts&nbsp;to defensive sectors," wrote Carey Hall, an equity and quantitative strategist. "With our economists'&nbsp;forecast for 6% US GDP growth (strongest since&nbsp;1984), we see smaller stocks as a better way to invest in the economic rebound than larger stocks."</p><p>Carey Hall says the economy has moved from the early stages of a recovery into the middle stages of the cycle. That's still a period where small cap, risk, and value factors should work well. And confirming that thesis, she says risk factors were the best way to outperform in January.</p><p>She adds that today, there's also reason to believe smaller and less-expensive stocks are underappreciated.</p><p>"Low Price&nbsp;has tended to outperform in small caps for ~16&nbsp;mos. (and by ~50ppt)&nbsp;following&nbsp;market troughs&nbsp;(vs.&nbsp;outperformance for less than a year/~30ppt today,&nbsp;suggesting&nbsp;potential for&nbsp;further upside)," Carey Hall wrote.</p><p>With those ideas in focus, Carey Hall names these companies as top picks. They're all "Buy" rated and rank in the top 20% of the <a href="https://markets.businessinsider.com/index/russell_2000">Russell 2000</a> based on their sensitivity to US GDP. They are also among the cheapest 40% of Russell 2000 stocks based on their valuations as measured by either price-to-book ratio, forward price-to-earnings ratio, or enterprise-value-to-sales ratio.</p><p>Those stocks are ranked from lowest to highest based on how much further they have to rise to meet Bank of America's 12-month price targets. Those figures were calculated based on Friday's closing prices as a way of showing how much upside the stocks could have.</p><p><strong>SEE ALSO:&nbsp;<a href="https://www.businessinsider.com/stock-picks-highest-short-interest-retail-squeeze-targets-goldman-sachs-2021-2" >GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target themand the group has already nearly doubled over the past 3 months</a></strong></p><h3>14. ArcBest</h3><img src="https://static5.businessinsider.com/image/602fdb627b571500189f6444-400-300/14-arcbest.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/arcb-stock">ARCB</a></p><p><strong>Sector</strong>: Industrials</p><p><strong>Market cap</strong>: $1.4 billion</p><p><strong>Forward price to earnings</strong>: 14.7</p><p><strong>GDP beta</strong>: 3.2</p><p><strong>Price target</strong>: $53</p><p><strong>Upside to target</strong>: -5.2%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>13. UMB Financial</h3><img src="https://static4.businessinsider.com/image/602fe3b98b93230018712717-400-300/13-umb-financial.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/umbf-stock">UMBF</a></p><p><strong>Sector</strong>: Financials</p><p><strong>Market cap</strong>: $3.8 billion</p><p><strong>Forward price to earnings</strong>: 14.2</p><p><strong>GDP beta</strong>: 0.1</p><p><strong>Price target</strong>: $84</p><p><strong>Upside to target</strong>: 3.8%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>12. Cracker Barrel Old Country Store</h3><img src="https://static6.businessinsider.com/image/602fdc3ad3570b001809287b-400-300/12-cracker-barrel-old-country-store.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/cbrl-stock">CBRL</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $3.5 billion</p><p><strong>Forward price to earnings</strong>: 28.7</p><p><strong>GDP beta</strong>: 1.7</p><p><strong>Price target</strong>: $160</p><p><strong>Upside to target</strong>: 4.3%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>11. Retail Opportunity Investments</h3><img src="https://static5.businessinsider.com/image/602fe3f38b9323001871271c-400-300/11-retail-opportunity-investments.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/roic-stock">ROIC</a></p><p><strong>Sector</strong>: Real estate</p><p><strong>Market cap</strong>: $1.9 billion</p><p><strong>Forward price to earnings</strong>: 13.7</p><p><strong>GDP beta</strong>: 0.1</p><p><strong>Price target</strong>: $17.50</p><p><strong>Upside to target</strong>: 11.2%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>10. Helix Energy Solutions Group</h3><img src="https://static2.businessinsider.com/image/602fdefad3570b001809289a-400-300/10-helix-energy-solutions-group.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/hlx-stock">HLX</a></p><p><strong>Sector</strong>: Energy</p><p><strong>Market cap</strong>: $748 million</p><p><strong>Forward price to earnings</strong>: 206.0</p><p><strong>GDP beta</strong>: 0.1</p><p><strong>Price target</strong>: $5.50</p><p><strong>Upside to target</strong>: 12.0%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>9. Patterson</h3><img src="https://static4.businessinsider.com/image/602fdec0d3570b0018092899-400-300/9-patterson.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/pdco-stock">PDCO</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Market cap</strong>: $3.0 billion</p><p><strong>Forward price to earnings</strong>: 16.1</p><p><strong>GDP beta</strong>: 0.2</p><p><strong>Price target</strong>: $36</p><p><strong>Upside to target</strong>: 13.8%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>8. Louisiana-Pacific</h3><img src="https://static3.businessinsider.com/image/602fe1418b93230018712709-400-300/8-louisiana-pacific.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/lpx-stock">LPX</a></p><p><strong>Sector</strong>: Materials</p><p><strong>Market cap</strong>: $5.0 billion</p><p><strong>Forward price to earnings</strong>: 9.5</p><p><strong>GDP beta</strong>: 0.1</p><p><strong>Price target</strong>: $54</p><p><strong>Upside to target</strong>: 14.2%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>7. Urban Outfitters</h3><img src="https://static3.businessinsider.com/image/602fdd50d3570b0018092887-400-300/7-urban-outfitters.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/urbn-stock">URBN</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $3.0 billion</p><p><strong>Forward price to earnings</strong>: N/A</p><p><strong>GDP beta</strong>: 1.1</p><p><strong>Price target</strong>: $36</p><p><strong>Upside to target</strong>: 18.7%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>6. Hibbett Sports</h3><img src="https://static3.businessinsider.com/image/602fdd8a7b571500189f6453-400-300/6-hibbett-sports.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/hibb-stock">HIBB</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $1.0 billion</p><p><strong>Forward price to earnings</strong>: 9.7</p><p><strong>GDP beta</strong>: 0.8</p><p><strong>Price target</strong>: $78</p><p><strong>Upside to target</strong>: 20.0%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>5. Tenet Healthcare</h3><img src="https://static5.businessinsider.com/image/602fde077b571500189f6458-400-300/5-tenet-healthcare.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/thc-stock">THC</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Market cap</strong>: $5.3 billion</p><p><strong>Forward price to earnings</strong>: 10.9</p><p><strong>GDP beta</strong>: 0.5</p><p><strong>Price target</strong>: $64</p><p><strong>Upside to target</strong>: 25.6%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>4. Group 1 Automotive</h3><img src="https://static3.businessinsider.com/image/602fdcead3570b001809287f-400-300/4-group-1-automotive.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/gpi-stock">GPI</a></p><p><strong>Sector</strong>: Consumer discretionary</p><p><strong>Market cap</strong>: $2.7 billion</p><p><strong>Forward price to earnings</strong>: 7.6</p><p><strong>GDP beta</strong>: 1.2</p><p><strong>Price target</strong>: $187</p><p><strong>Upside to target</strong>: 25.7%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>3. Greif</h3><img src="https://static6.businessinsider.com/image/602fde86d3570b0018092895-400-300/3-greif.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/gef-stock">GEF</a></p><p><strong>Sector</strong>: Materials</p><p><strong>Market cap</strong>: $2.8 billion</p><p><strong>Forward price to earnings</strong>: 22.6</p><p><strong>GDP beta</strong>: 0.2</p><p><strong>Price target</strong>: $64</p><p><strong>Upside to target</strong>: 33.4%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>2. Owens & Minor</h3><img src="https://static5.businessinsider.com/image/602fe374a06a8e0018ce4442-400-300/2-owens-and-minor.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/omi-stock">OMI</a></p><p><strong>Sector</strong>: Healthcare</p><p><strong>Market cap</strong>: $2.0 billion</p><p><strong>Forward price to earnings</strong>: 15.0</p><p><strong>GDP beta</strong>: 0.1</p><p><strong>Price target</strong>: $37</p><p><strong>Upside to target</strong>: 41.7%</p><p><em>Source: Bank of America</em></p></p><br/><br/><h3>1. Rush Enterprises</h3><img src="https://static3.businessinsider.com/image/602fde3cd3570b0018092891-400-300/1-rush-enterprises.jpg" alt="" /><p><p><strong>Ticker</strong>: <a href="https://markets.businessinsider.com/stocks/rusha-stock">RUSHA</a></p><p><strong>Sector</strong>: Industrials</p><p><strong>Market cap</strong>: $2.2 billion</p><p><strong>Forward price to earnings</strong>: 22.6</p><p><strong>GDP beta</strong>: 0.2</p><p><strong>Price target</strong>: $61</p><p><strong>Upside to target</strong>: 48.1%</p><p><em>Source: Bank of America</em></p></p><br/><br/>
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