The widely followed S&P 500 and Nasdaq 100 indexes are trading at all-time highs while the small-cap-focused S&P 600 and mid-cap-heavy S&P 400 have made little progress since late 2021. Those two smaller indexes seem stuck, as they haven’t hit new cycle highs since March.
Large caps may lead for a while longer, Oppenheimer researchers wrote in a July 9 note. The firm, which just made its year-end S&P 500 target the second-highest on Wall Street, explained that it still prefers larger stocks to mid caps, which it in turn prefers to smaller companies.
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However, SMID caps have quietly but consistently built momentum throughout this year, even though they haven’t broken out yet. Oppenheimer noted that small and midsize stocks are in a clear long-term uptrend from a technical standpoint, which suggests a breakthrough is coming.
“Each of these unconfirmed averages are maintaining above prior breakout levels and their 200-day average,” Oppenheimer researchers wrote. “This leads us to favor a bullish resolution from their year-to-date range.”
Within SMID caps, Oppenheimer is especially bullish on midsize growth stocks. While their mega-cap peers have been all the rage, the firm sees the less-flashy group taking the reins and leading during the next leg of the market rally, potentially as soon as the next few months.
“Mid-cap growth remains our top rotation idea,” Oppenheimer researchers wrote. “We believe it strikes an attractive balance between secular growth leadership and intermediate-term rotation potential in lower-capitalized stocks.”
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8 stocks to buy for strong growth
The bulls at Oppenheimer have long been fans of SMID caps and keep a running list of the companies valued between $1 billion and $10 billion their analysts are most excited about.
This quarter’s list of 25 outperform-rated SMID cap stocks is quite similar to last quarter’s list, though there are several notable changes. Business Insider reviewed both lists and found that eight companies in the July basket weren’t listed in April.
Below are those eight SMID cap stocks that Oppenheimer is bullish on since they’ll benefit from growth themes, along with the ticker, market capitalization, sector, growth theme, price target and percent upside to that target, and selected commentary for each. Four of the firms — Arcosa, Blueprint Medicines, Sweetgreen, and Zeta Global — also have bullish technicals.