Thwarted expectations of up to 4 rate cuts in 2025 have sent US stocks tumbling down in recent days.
But investors could improve their chances of winning outsized returns in January if they stuck with low momentum names as, historically, they tend to outperform their high momentum peers early in the year, as per Julian Emanuel of Evercore ISI.
Additionally, he recommends investing in smaller stocks to beat the market in January.
In fact, Julian expects smaller stocks to remain strong throughout the year as Trump’s pro-business policies and accommodating credit regulations take effect.
Lastly, stocks that offer buybacks typically start the new year on a bullish note when the Fed is cutting interest rates, the investment firm told clients in a research note on Friday.
Two names that meet these three criteria and are worth owning heading into January are Cleveland-Cliffs Inc (NYSE: CLF) and Gentherm Inc (NASDAQ: THRM), according to Julian Emanuel.
Cleveland-Cliffs Inc
Cleveland-Cliffs has been rather painful for its shareholders this year but the start of the new year will likely breathe new life into this steel stock, as per the Evercore ISI analyst.
In fact, he’s not the only who’s uber bullish on CLF.
Last week, experts at Goldman Sachs assumed coverage of Cleveland-Cliffs stock with a “buy” rating.
Their $16 price target indicates potential for a more than 70% upside from here.
The investment bank expects CLF’s self-help initiatives aimed at cost control to prove successful.
It’s positive on Cleveland-Cliffs stock also because value-enhancing projects could help drive earnings growth and margin expansion in 2025.
Goldman Sachs is bullish on the company’s $2.5 billion acquisition of Stelco as well.
CLF shares, however, remain unattractive for income investors as they do not currently pay a dividend.
Gentherm Inc
Another name that meets Evercore ISI’s criteria and may, therefore, outperform in January is the automotive stock Gentherm.
Much like CLF, Gentherm has been in a sharp downturn over the past ten months and is now trading at a rather attractive valuation.
Gentherm stock recently received an upgrade from JPMorgan that cited solid execution for the change of heart.
“The company has benefitted considerably from its 2022 acquisition of Alfmeier, including via greater than expected revenue synergies stemming from go-to-market improvements and faster product innovation,” its analyst Ryan Brinkman told clients at the time.
The consensus rating on Gentherm shares currently sits at “overweight”, with one analyst indicating potential for upside to as much as $68 that translates to about an 80% stock price increase from current levels.
THRM, however, does not pay a dividend at writing either.
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