These underperformers could be the next to join the comeback rally, Jefferies says

Published Tue, Mar 29 202211:11 AM EDT

The S & P 500 has rebounded about 10% after dropping 13% to start the year, but the leaders of the rebound party have had a "fairly exclusive guest list," according to Jefferies analysts. Only four sectors and about 34% of the index members have led the rally since the early March lows, the analysts said in an investor note Tuesday. As stocks look to extend their gains, investors seeking to grab a piece of the near-term action can find good opportunities in the index's laggards. Jefferies has selected several it finds particularly compelling. "With broader indexes well off lows and macro risks still front and center, the environment appears ripe for continued volatility and limited upside," the firm said. "Selecting the S & P 500 laggards has been an effective strategy over the past 12 months," it continued. "The strategy has beaten the overall benchmark to start the year. In addition, chasing market leaders has led to lower returns. While over the past month leaders have worked best, we believe investors should consider positioning for a resurgence in beaten down shares." Jefferies highlighted 52 stocks that are buy-rated by its analysts and have underperformed their sectors in the past 12 consecutive months. Here are 10 of them: Airbnb is one of Jefferies' favorites on the list. While the stock is up in 2022, it has underperformed over the past 12 months in large part because of poor sentiment for high-multiple growth stocks and travel stocks due to pandemic-related uncertainty. However, the Jefferies analyst on the stock sees the vacation accommodation company as one of the key beneficiaries of changing travel behavior. The firm's price target on the stock is about 34% from where the shares closed on Monday. The food company Conagra , which owns brands like Hunt's ketchup and Reddi Wip, has seen a lag in cost inflation and its impact on profitability. Jefferies' analyst on the stock is bullish on shares, however, given their potential to bounce back on margin profitability due to incremental pricing into the end of the year. His $40 price target on the stock is 25% higher from the shares' closing price Monday. Amgen , Vertex , Cheesecake Factory and Chegg are among Jefferies' other top picks. Best Buy , Palantir , Biogen and Spotify are also on the list.

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The S&P 500 has rebounded about 10% after dropping 13% to start the year, but the leaders of the rebound party have had a "fairly exclusive guest list," according to Jefferies analysts.