Thomas Lee, head of research at Fundstrat Global Advisors, believes a market rally may be in the cards, recommending investors buy out-of-favor names as a way to create excess returns.
One reason for Lee's investment thesis is the current cautionary outlook from retail investors, which at extreme levels, has been bullish for stocks.
"Risk aversion has surged to levels that historically were jump points for 'V-shaped' rallies," said Lee, pointing to one of the ratios tracked by his firm, which last week had its lowest reading in more than two years.
Another reason that could propel equities, according to Lee, is the rising short interest for the SPDR S&P 500 ETF, up 58 percent this year.
"The broader conclusion, for us, is that short interest in the SPY is well above the October 2014 levels and when the positive catalyst emerges, would be a source of buying power for equities," he added.