Most stocks haven’t been able to sustain their fast start to 2023, but these small and mid caps are outperforming and primed to keep growing.
Investors’ hopes for a fast rebound in the stock market in 2023 have fizzled since the New Year’s rally, with the S&P 500 falling 2% since a 6.2% January bounce, but small and mid cap stocks have sustained their advantage in the first quarter of the year, and many are still trading at attractive valuations.
The Russell 2000 index is up 6.7% this year, beating the S&P 500’s 3.8% gain, and one stock fueling that outperformance so far is Denny’s, posting a 25% gain this year after three years of underperforming. The franchised diner chain known for its Grand Slam breakfasts complete with pancakes, eggs, bacon and sausage generated $456 million in revenue last year, 15% higher than 2021 though below its typical pre-Covid performance. Its stock is still down 50% from its summer 2019 peak and trades at just 9.8 times earnings, half the 19.6 average trailing P/E for the S&P 500.
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