Top 3 small-cap stocks set for growth, according to banks

The trading momentum has been exhausted by large-cap stocks in the market, especially those in the technology sector, such as names like Nvidia Co. NASDAQ:NVDA continue to reach new all-time highs. For this reason, PGIM analysts believe Wall Street may soon turn to small-cap stocks to squeeze out further returns.

As the soldiers follow the general, the actions please SolarEdge Technologies Inc. NASDAQ: SEDG, AB Electrolux OTCMKTS: ELUXYand even Antero Resources Co. NYSE:AR they once lagged and may now be catching up with broader indices. Each was tied to its own set of favorable economic factors, and analysts and institutions had sufficient reasons to incentivize and buy them.

Small businesses tend to outperform larger ones during easing economic cycles. Now that the Federal Reserve (the Fed) is looking to cut interest rates in 2024, these small-cap stocks could help retail investors expand their wealth in the next wave of economic activity.

SolarEdge: Oil’s Ugly Cousin

Oil prices have finally broken through the $80 per barrel mark, and analysts are at this point The Goldman Sachs Group Inc. NYSE:GS I believe it could reach $100 a barrel this year.

Since the Fed could probably cut interest rates by May or June 2024, or so traders think, according to the FedWatch tool in CME Group Inc. NASDAQ: ECMraw materials such as oil are advancing in anticipation of an economic recovery.

While most may focus on energy stocks, others may spot spillover opportunity in green energy stocks like SolarEdge. As oil becomes more expensive, alternative energy sources like solar become more attractive, and that’s where this stock comes in.

There must be a reason why analysts believe its earnings per share (EPS) could grow by up to 330% over the next 12 months. EPS typically determines stock prices and valuations; SolarEdge shares are trading just 22% of their 52-week high despite these growth projections, a gap that needs to be filled by investors with enough stomach to buy a small name.

Those a The PNC Financial Services Group Inc. NYSE:PNC had enough stomach, increasing its stock position by 41.5%, a purchase of about $585,000.

Additionally, analysts now have a $109 price target for the stock, predicting a 55% upside from today’s prices.

The Buffett effect hits Electrolux

Interest rate cuts could also affect the future trend of mortgage rates. Historically, mortgage rates (i.e. the 30-year fixed rate) track the overall credit market, where the Fed interest rate reigns supreme.

Betting on stimulating new construction activity, following increased real estate demand resulting from more accessible financing, Buffett bought residential construction stocks such as D.R. Horton Inc. NYSE: DHI and other.

New homes listed for sale typically bring with them appliances, both in the kitchen and others such as air conditioning. With 35% of its sales coming from the North American market, Electrolux could represent a viable way for investors to ride the aftereffects of this real estate boom.

This could be one of the reasons why Wall Street analysts expect more than 1,000% growth in earnings per share (EPS) at Electrolux for the next 12 months.

Additionally, the stock is trading at just 50% of its 52-week high, a price not seen since the 2008 financial crisis; Despite this bearish momentum as of late, short-term interest in the stock has dropped 62.5% over the past month, paving the way for new buyers to enter.

Antero leads the oil highs

The same oil trends that help renewable energy stocks like SolarEdge are the ones that could lead Antero Resources higher. Oil is now trading at $85 a barrel, a price not seen since October 2023, bringing the cost of Antero shares back to October 2023 levels.

At 96% of its 52-week high, the stock could break into a new prolonged uptrend if oil prices allow further expansion. Analysts and their 580% EPS growth projections could make this upward path a reality by showing Main Street where the juice is.

As of March 2024, JP Morgan Chase & Co. New York Stock Exchange: JPM have raised their price targets for Antero stock to $32 per share, an upside of nearly 10% from today’s prices. Since oil has risen significantly since the latest push, investors may expect another round.

As the macro asset manager, Vanguard Group increased its position in Antero by 0.6% last quarter, with a purchase of approximately $3.7 million.

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