Small-cap stocks are starting to rebound after falling into a bear market earlier this year and Wall Street analysts are turning bullish as the market rally broadens out beyond mega-cap technology names such as Nvidia (NVDA).
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The Russell 2000 (RUT) index that is comprised mainly of stocks with market capitalizations below $25 billion has risen 6% in the past month, outpacing the benchmark S&P 500’s 4% gain. Small-cap stocks leading the charge higher include Carvana (CVNA), Super Micro Computer (SMCI), and Comfort Systems USA (FIX).
Despite underperforming mid- and large-cap stocks for more than a decade, analysts on Wall Street now appear to be cautiously optimistic on small-caps. Reasons forecasters are turning bullish include a revived market for initial public offerings (IPOs) after several down years. Most start-up companies that IPO begin their publicly traded life as a small-cap stock.
Domestic Focus
An economic downturn could also benefit small-cap stocks as smaller businesses with less foreign exposure have historically performed well during bear markets. Market data shows that, over the last 20 years, small-cap stocks have gained an average 60% in the year following a bear market, typically defined as a drop of 20% or more from recent highs.
Valuations of small-cap stocks are also more attractive than the valuations seen in large-caps, particularly technology stocks. This could further spur an investor rotation, say some analysts. Lastly, small-cap stocks, which tend to be of smaller companies with a domestic focus, are less vulnerable to import tariffs than larger, international concerns.
FIX stock is up 24% this year.
Is FIX Stock a Buy?
The stock of Comfort Systems USA has a consensus Strong Buy rating among four Wall Street analysts. That rating is based on three Buy and one Hold recommendations issued in the last three months. The average FIX price target of $562.33 implies 4.08% upside of from current levels.
