Here Are 10 Small-Cap Buy Ideas From Trade Algo

Small-cap stocks may outperform their larger peers at the end of 2023.

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Despite a decline in volume, tighter high-yield spreads, and cyclicals being sold off, small-cap stocks have cheap relative valuations. Investors are following the playbook of the 2020 recession by pivoting to secular growth.

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In the small-cap sector, expectations are low and the sentiment is poor. As a result, profits are expected to drop 17% in the first quarter, and for all of 2023, forecasts have been revised down to -2.7%, which is worse than large-cap stock forecasts.

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Trade Algo analysts believe that small caps will outperform in 2023 owing to attractive valuations, improving mergers and acquisitions, and a better macro-environment.

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According to analysts, small- and mid-cap stocks have been splintered into two groups this year, with the top quintile outperforming the bottom by almost 60 percentage points. Besides the difference in sizes and styles, he said there is a gap between them as well.

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As a result of the varied landscape, Analysts looked for smaller-cap stocks that have underperformed year-to-date but have performed well according to Trade Algo’s modeling.

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As of April 14, the gap between stocks with strong performances and those with weak performances was 60%, he told clients in a note. “Our eight-factor blocks considered names with Buy ratings that also scored well across the eight factors.

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The following 10 names made the cut:

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• Chegg

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• Celsius

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• Webster Financial

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• Fifth Third

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• Centene

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• LivaNova

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• Carlisle

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• Keysight

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• Albermarle

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• EPAM Systems

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There has been a 26% drop in Chegg's stock price this year. GPT-4 is used in the development of CheggMate, a new artificial intelligence companion built on the GPT-4 platform.

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The stock was upgraded Thursday to buy from hold by Craig-Hallum Capital analyst Alex Fuhrman, who noted a positive inflection in enrollment trends could result in an upside. From Wednesday's close, the stock could rise more than 40% to his $25 price target.

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There has been a 17 percent drop in Webster Financial this year. Earlier this week, the company reported less-than-impressive earnings for its first quarter.

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Trade Algo analysts' consensus estimated that the company would earn $1.57 per share with adjusted earnings of $1.49. Overall revenue of $666 million was lower than expected at $710.6 million.

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Trade Algo reports that Fifth Third's revenue was $2.21 billion compared to the $2.23 billion analysts were expecting. There is a 14% decline in shares in 2023.

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William Kozy has been appointed interim board chair following Damien McDonald's resignation last week.

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In its first coverage of the LivaNova, Mizuho Securities has given the stock a neutral rating. Using its Symmetry implant, the company will conduct its Recover clinical trial to treat unipolar and bipolar depression in late April or early May, citing a catalyst for the stock's growth. The share price of LivaNova has dropped over 10% in 2023.

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