There is a recurring pattern in Wall Street history known as the “January effect,” in which small-cap stocks outperform their large-cap brethren, and the lower-capitalization and lower-quality names are often the biggest winners. Steven DeSanctis, the Jefferies outstanding equity strategist, feels that, given how awful 2022 has been, not only could the January effect be in play, but it could rear its head in a big way. That could be particularly positive for a group of stocks that were pulverized this year.
DeSanctis feels that the lower-cap stocks are cheap across the board, and really only need trading flows to pick up for the stocks to get a huge tailwind. He noted this in a recent research report:
We see a good possibility based on when the first 11-months have been this bad, December is weaker than normal, but January is much better. We also found that when a majority of stocks are in the red for the year, the next January’s return is also above average with lower market cap performing best. We wanted to find stocks that could get a bounce once tax-loss selling ended, but are not going to be a one-hit wonder like The Knack. We looked for names that are Buyated by our analysts, rank well on our Quality metrics, but have significantly underperformed the universe.
Twenty stocks matched the Jefferies metrics, and we screened for the technology and internetelated stocks that could be poised to shoot higher after a dreadful year. Five well-known top Buyated names look like solid ideas for aggressive growth investors looking to exploit the January effect potential. It is important to keep in mind that no single analyst report should be used as a sole basis for any buying or selling decision.
DraftKings
While sports betting has exploded across the United States, the cost of acquiring and maintaining bettors has weighed heavily on the top names in the business. DraftKings Inc. (NASDAQ: DKNG) operates as a digital sports entertainment and gaming company. It offers multichannel sports betting and gaming technologies, powering sports and gaming entertainment for operators in 17 countries.
The company operates iGaming through its DraftKings brand in five states, as well as operates Golden Nugget Online Gaming, an iGaming product and gaming brand, in three states. Its Sportsbook is live with mobile and/or retail betting operations in the United States pursuant to regulations in 18 states.
DraftKings daily fantasy sports product is available in six countries with 15 distinct sports categories. In addition, it offers DraftKings Marketplace, a digital collectibles ecosystem designed for mainstream accessibility that offers curated NFT drops and supports secondary-market transactions, as well as owns Vegas Sports Information Network, a multiplatform broadcast and content company.
Jefferies has a $33 price target on DraftKings stock. The consensus target is lower at $20.70, and the stock closed on Tuesday at $11.83.
Etsy
Shares of this top internet retail name have been almost cut in half over the past year. Etsy Inc. (NASDAQ: ETSY) operates two-sided online marketplaces that connect buyers and sellers, primarily in North America, Europe and India. Its primary marketplace is Etsy.com, which connects artisans and entrepreneurs with various consumers.
Sponsored: Find a Qualified Financial Advisor
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
