Bank of America: 14 stocks transforming their businesses and creating long-term profits that the market is missing — including one with 181% upside

• Small and mid-cap stocks transforming their businesses can create great investment opportunities.
• Bank of America’s Jill Carey Hall found 14 stocks making changes that the market hasn’t noticed yet.
• These changes include mergers, divestments, utilizing AI, and more.

The stock market is always in flux, and companies that want to stay alive need to change with the times. 

Bank of America equity & quant strategist Jill Carey Hall knows this is particularly true for small and mid-cap (SMID-cap) stocks. While their blue-chip peers with deeper pockets can simply settle down and pay shareholders dividends rather than try to overhaul their businesses, it’s imperative that SMID-caps adjust.

As Carey Hall pointed out in a recent note to clients, that’s exactly what many SMID-cap stocks are doing right now. 

“Small and mid caps are transforming,” she wrote. “Even at the index level we’ve seen shifts – from greater FCF generation/cash return (40% pay dividends today vs. a third a decade ago) to more focus on innovation (R&D/sales 6% today vs. 2% a decade ago) and other shifts.” 

These transformations can come in all shapes and sizes. Mergers and acquisitions are some of the best-known methods of changing a company, while incorporating technology like AI is a newer way of giving a stock a facelift. Sometimes SMID-caps choose addition by subtraction, divesting arms of their businesses that aren’t additive to the bottom line. And sometimes, simply coming up with a new business strategy can revolutionize a company.

However, many investors may not realize how powerful a company’s transformation can be until after the fact, when shares have risen and Wall Street is lauding the turnaround and the opportunity has already passed by. So, Carey Hall went looking for SMID-cap stocks that are undergoing or have recently completed a transformation that the market hasn’t noticed yet — giving investors an opportunity to get in now before shares pop later.

“We collaborated with our fundamental analysts to identify “Transforming SMIDs” — US small or mid cap stocks where they see near- and/or long-term upside potential given the transformation of their businesses that may not be appreciated by investors,” Carey Hall wrote. 

The 14 stocks the BofA analysts chose are below, along with their tickers, sectors, market caps, price objectives, and upsides to those objectives. There are also details about the transformation each company is undergoing provided by the analysts themselves.