Buy these 7 unheralded stocks right now for near-term upside of at least 25% as growth accelerates to a new level, RBC says

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While investors watch the presidential election, the will-they-or-won't-they stimulus talks on Capitol Hill, and the latest COVID-19 and economic numbers, it would be understandable if other developments slip through the cracks.

In case traders are otherwise occupied, a team of analysts at RBC is filling in by collecting its best US small-company stock ideas as the fourth quarter gets underway. It's also timely because after the initial stages of the market's rally were dominated by larger companies, small caps have caught fire recently.

If stocks follow their historic patterns, smaller companies could be the biggest winners as the economy gets back up to speed following the deep recession earlier this year. And RBC says these companies are on track for both long-term success and substantial gains in the short term.

The following seven companies are all rated "outperform" by RBC's analysts, and they all have market capitalizations of $5 billion or less. They are reasonably heavily traded, as their average daily volumes top the $10 million market. The septet are all 25% away from their 12-month price targets.

All of the stocks hail from either the tech sector, the best-performing part of the market in 2020, or from healthcare, which has received new attention as an investment theme in the wake of the coronavirus pandemic.  

The stocks are ranked in increasing order of price upside implied by RBC's targets. Percentages were calculated based on Thursday's closing prices.

SEE ALSO: A Wall Street chief strategist shares the best defense against a much-feared spike in inflation — and explains why it's a better option than 7 more traditional hedges

7. J2 Global

Ticker: JCOM

Sector: Information technology

Market cap: $3.4 billion

Thesis: "J2 has very strong operational and transactional expertise, access to capital, and financial discipline (IRR and ROIC targets) that are core to the company and a key differentiating strength ... J2's Digital Media segments address the $1T+ Global advertising market and benefit from an ongoing shift to digital."

Price target: $90

Upside to target: 27.0%

Source: RBC Capital Markets



6. Jamf Holding

Ticker: JAMF

Sector: Information technology

Market cap: $4.1 billion

Thesis: "As the standard in Apple enterprise management, we think Jamf is in a strong position to leverage the growing preference for Apple in the enterprise. ... the company's financial profile is unique given rapid growth and high profitability."

Price target: $44

Upside to target: 27.5%

Source: RBC Capital Markets



5. PROS Holdings

Ticker: PRO

Sector: Information technology

Market cap: $1.5 billion

Thesis: "We think a cloud delivery model helps, given the compute intensity and size of data sets associated with this type of software. It also means the software can be consumed in smaller deals with faster time to value."

Price target: $45

Upside to target: 30.9%

Source: RBC Capital Markets



4. Tabula Rasa HealthCare

Ticker: TRHC

Sector: Healthcare

Market cap: $947 million

Thesis: "Tabula Rasa is on the list for its growth in IT solutions aimed at reducing the financial and medical burdens of adverse drug events."

Price target: $57

Upside to target: 37.3%

Source: RBC Capital Markets



3. eHealth

Ticker: EHTH

Sector: Healthcare

Market cap: $2.1 billion

Thesis: "eHealth is the only company in our universe that should not be impacted by the COVID-19 pandemic. As long as Americans keep turning age 65, eHealth's addressable market grows."

Price target: $127

Upside to target: 53.5%

Source: RBC Capital Markets



2. Rackspace Technology

Ticker: RXT

Sector: Information technology

Market cap: $3.5 billion

Thesis: Current valuation only gives credit to where the company is today in its transition, but does not underwrite the positive mix shifts that are occurring in the underlying business."

Price target: $29

Upside to target: 60.6%

Source: RBC Capital Markets



1. Agios Pharmaceuticals

Ticker: AGIO

Sector: Healthcare

Market cap: $2.5 billion

Thesis: "Agios Pharmaceuticals is highlighted for its revenue ramp and pipeline in oncology."

Price target: $68

Upside to target: 93.3%

Source: RBC Capital Markets



Business Insider

  • A team of RBC analysts focusing on small-company stocks just unveiled an updated list of top picks.
  • Smaller companies usually outperform in a recovering economy, and those stocks have taken off recently.
  • The firm's highest-upside names are concentrated in two areas that have been hot for most of 2020: Tech and healthcare.
  • Visit Business Insider's homepage for more stories.

While investors watch the presidential election, the will-they-or-won't-they stimulus talks on Capitol Hill, and the latest COVID-19 and economic numbers, it would be understandable if other developments slip through the cracks.

In case traders are otherwise occupied, a team of analysts at RBC is filling in by collecting its best US small-company stock ideas as the fourth quarter gets underway. It's also timely because after the initial stages of the market's rally were dominated by larger companies, small caps have caught fire recently.

If stocks follow their historic patterns, smaller companies could be the biggest winners as the economy gets back up to speed following the deep recession earlier this year. And RBC says these companies are on track for both long-term success and substantial gains in the short term.

The following seven companies are all rated "outperform" by RBC's analysts, and they all have market capitalizations of $5 billion or less. They are reasonably heavily traded, as their average daily volumes top the $10 million market. The septet are all 25% away from their 12-month price targets.

All of the stocks hail from either the tech sector, the best-performing part of the market in 2020, or from healthcare, which has received new attention as an investment theme in the wake of the coronavirus pandemic.  

The stocks are ranked in increasing order of price upside implied by RBC's targets. Percentages were calculated based on Thursday's closing prices.

  • Buy these 7 unheralded stocks right now for near-term upside of at least 25% as growth accelerates to a new level, RBC says photo


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