Small cheap stocks are outperforming. Here's how to play them

People visit the Charging Bull Statue during Covid-19 pandemic in Lower Manhattan, New York City, United States on May 25, 2020.
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Small- and mid-cap stocks have taken off in recent weeks, and Jefferies said in a new note that there are several stocks that will lead the next leg of the rally. 

Since a June 11 pullback, the Russell 2000 has risen 5.7% while the S&P 500 has bounced back 3.8%. Smaller stocks should continue to be a smart bet in the weeks ahead, the firm said in a note to clients.

"Smaller market caps are quietly outperforming, we think this trend continues," the note said.