Small-cap stocks are up a record ninth month in a row. Here are some of Jefferies' favorites

Published Wed, Jun 30 202112:21 PM EDTUpdated Wed, Jun 30 20211:15 PM EDT

Small-cap stocks are on a winning streak, and Jefferies thinks they have more room to run. The Russell 2000 , which is made up of small-cap names, is up roughly 1.7% in June. It's on track for its first-ever nine-month winning streak. "We think we are in the midst of a small-cap outperformance in which small beats large over an extended period of time," Jefferies small- and mid-cap strategist Steven DeSanctis said in a note earlier this week. DeSanctis is one of the most followed analysts covering the small-cap space on Wall Street. The Russell 2000 has gained about 16.8% higher this year, and is outperforming the large-cap S & P 500, which is up 14.3% in 2021. A recovering global economy, earnings growth and improving valuations support small- and mid-cap stocks' strong performance, according to Jefferies. DeSanctis noted that, since 1926, the average small-cap outperformance cycle has lasted about five years. "One can only hope we come close to that this time around," DeSanctis added. Jefferies highlighted some of its favorite small- and mid-cap stocks. Take a look at 10 of their picks. Jefferies recently upgraded shares of apparel retailer Abercrombie & Fitch to a buy rating, citing gains from improved branding and profit margins. The company's first-quarter earnings report in May solidly beat Wall Street expectations. Analyst Alex Slagle named Bloomin' Brands his top value pick. The restaurant company is Slagle's "go-to for investors looking for real value in a well-run company that is positioned to see significant gains coming out of the pandemic." Bloomin' Brands owns several casual dining chains, including Outback Steakhouse and Carrabba's Italian Grill. Regional bank Western Alliance also makes Jefferies' list of favorite down-cap names. Jefferies says Western Alliance's strong organic growth prospects sets the bank apart from its peers. Other small- and mid-cap stocks favored by Jefferies include International Paper , El Pollo Loco and Mercury Systems . — CNBC's Michael Bloom contributed to this report.

Pedestrians are reflected in the window of an Abercrombie & Fitch store in New York.

Craig Warga | Bloomberg | Getty Images

Small-cap stocks are on a winning streak, and Jefferies thinks they have more room to run.

The Russell 2000, which is made up of small-cap names, is up roughly 1.7% in June. It's on track for its first-ever nine-month winning streak.