‘Earnings are better, valuations are cheaper.’ Here are 18 small-cap stock ideas from Jefferies

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'Earnings are better, valuations cheaper, just need macro to turn back up. Watch for big burst of outperformance,” strategists say.

How long can the Federal Reserve hold off before tapping the brakes on its ultra accommodative monetary policy? The biggest rise in consumer prices since 2008 has provided plenty of food for thought on that front.

“Small has taken it on the chin vs. large since 3/15, but we are believers in the outperformance cycle. Earnings are better, valuations cheaper, just need macro to turn back up. Watch for big burst of outperformance,” they said in a note to clients on Wednesday. As for their stock picks, given not all small-to-midcap asset class have performed well year to date, “we looked for buy-rated names that we determined were higher quality, better balance sheet, and cheap,” said DeSanctis and Lockenvitz.

Apple AAPL, +2.02% is reportedly boosting iPhone production by up to 20% this year, on anticipation of heavy demand for its next upgrades. J.P. Morgan analysts added Apple to their focus list, lifting the price target to $175. Those shares were up in premarket trade.

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