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19 of the Best Stocks You've Never Heard Of

·21 min read

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To hear some tell it, bigger is always better on Wall Street.

After all, when Amazon.com (AMZN) is worth $1.2 trillion and boasts a dominant market share in both e-commerce and cloud computing - two megatrends that aren't disappearing anytime soon - why bother with the little guys?

But those monitoring only mega-caps when seeking out the best stocks to buy might have failed to notice under-the-radar picks with more modest market values that have led the market's rally since March. As proof, consider that the small-cap Russell 2000 is up 44% since it bottomed out March 18, compared with about 39% for the blue-chip S&P 500 off its March 23 lows.

If you're looking to outperform the market in 2020, then, you have to look beyond the usual suspects. Not only are larger stocks as a group lagging behind their smaller brethren lately, but a more fundamental fact is that most index funds are weighted toward larger companies by design; Amazon, Apple (AAPL) and Facebook (FB) currently represent about 15% of the entire S&P 500. The remaining 85% is split among 497 other components!

Whether you're looking for bigger returns or simply better diversification, here are 19 of the best stocks you've never heard of.

SEE ALSO: 50 Top Stock Picks That Billionaires Love

Aecom

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Sector: Industrials

Market value: $6.2 billion

Dividend yield: N/A

Engineering and construction player Aecom (ACM, $38.90) was one of the stocks hit hardest by the downturn. ACM shares were cut by more than half from late February to mid-March.

However, Aecom might be one of the best stocks on the upswing. Shares have come roaring back lately as the company's architectural planning, consulting and program management offerings have proven robust, even in the face of coronavirus difficulties.

In fact, the momentum in Aecom has picked up even more after a late May presentation, including a roughly 10% gain in a single session June 2 to mark the largest percentage increase in share prices since 2016. The reason was a powerfully reassuring message from Aecom's leadership, including reaffirmation of its previous 2020 guidance and word that the firm continues to dominate market share when it comes to lucrative federal government contracts.

Wall Street has responded strongly. Citigroup recently upgraded its price target from $43 per share to $50 and maintained a Buy rating on ACM stock. Bank of America's Michael Feniger (Buy) says "the stars are aligning for ACM's value to be realized - at the very least, for the cash return story to take hold."

SEE ALSO: 14 Best Tech Stocks That Aren't on Your Radar

Allegheny Technologies

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Sector: Industrials

Market value: $1.3 billion

Dividend yield: N/A

Allegheny Technologies (ATI, $10.48) isn't really a technology company in the traditional sense. In fact, this small-cap stock is one of the world's largest producers of specialty metals including titanium and nickel alloys.

However, the materials produced by Allegheny are high-quality and tailor-made for businesses that can't use conventional iron or steel based on extreme business uses such as high temperatures, extraordinary stresses or corrosion. For instance, one of ATI's biggest customers is the aerospace industry, which needs Allegheny's products to build jet engines.

Needless to say, the businesses that need Allegheny's expertise don't have a lot of alternatives if they want to operate at a high level. That lends itself to stable revenues and generous margins - common traits among Wall Street's best stocks.

Morningstar analysts give Allegheny four out of five stars, and experts there are particularly interested in the longer-term potential for Allegheny to win new business.

"The aerospace industry is likely to drive substantial growth for Allegheny in the years to come as next-generation jet engines and airframes will require significantly larger volumes of titanium and nickel-based alloys in order to minimize weight and maximize fuel efficiency," Morningstar Strategist Andrew Lane wrote in a May report.

SEE ALSO: 20 Best Stocks to Buy Now for the Next Bull Market

Bill.com Holdings

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Sector: Information technology

Market value: $6.1 billion

Dividend yield: N/A

Silicon Valley firm Bill.com Holdings (BILL, $81.86) does exactly what the name implies: It offers payments processing services such as ACH transfers, virtual credit cards and digital checks for small businesses.

It's a much-needed service that is particularly important in 2020 as companies have to figure out how to do business digitally. And Bill.com is sure to stick with many of its newer clients who are proving out the value of this web-based payments portal over their old accounting methods.

At least, that's what Wall Street seems to think.

Increased adoption rates and better monetization across the start of the year has analysts quite pleased; Piper Sandler, Needham, KeyCorp, BofA and Jefferies all labeled the stock a Buy or boosted their price targets in May, suggesting it's one of the best stocks to buy among mid-caps.

Those positive forecasts came on the heels of a stellar earnings report that included 46% revenue growth as subscripts and transactions surged 63% over the prior year. In other words, the recent optimism is backed by impressive numbers.

SEE ALSO: 7 Biotech Stocks Wall Street Says Will Double or More

BorgWarner

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Sector: Industrials

Market value: $6.9 billion

Dividend yield: 2.1%

BorgWarner (BWA, $33.25) is a specialty automotive company that offers powertrain components to vehicle manufacturers. This might sound like a niche business, but BWA is actually pretty darn diversified across diesel trucks, gas-powered SUVs, hybrid sedans and even the fast-growing electric vehicle segment. This allows BorgWarner to go where the opportunity is ... and right now, that means it can ramp up its EV business.

For investors looking to play this trend but leery of volatile picks like Tesla (TSLA) and slumping stocks like Ford (F) will ever catch up, BWA is a great alternative.

The stock gets a vaunted five-star rating from Morningstar, whose analysts wrote earlier this year that "BorgWarner is well positioned for the trends in the auto sector that will result in revenue growth in excess of the growth in global automobile demand."

JPMorgan's Ryan Brinkman (Overweight, equivalent of Buy) says there's evidence new-vehicle sales and used-car pricing are recovering in May and June almost as quickly as they plunged in March and April - a boon to BWA shares. Similar optimism has other analysts putting BWA among their highly rated stock picks.

SEE ALSO: The 30 Best Mutual Funds in 401(k) Retirement Plans

China Unicom

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Sector: Communications

Market value: $17.4 billion

Dividend yield: 3.7%

As you may have guessed, China Unicom (CHU, $5.68) is based in Asia - Hong Kong, to be exact. But what you likely didn't know is that even though it's "only" the second-largest telecom firm in China, it boasts a stunning 270 million mobile subscribers - almost as much as the roughly 320 million lines operated by AT&T (T) and Verizon (VZ) combined. On top of that, it has nearly 80 million broadband internet connections.

What's more, China Unicom has been investing heavily in 5G communications technology as it upgrades its already expansive network to better serve customers (and justify steadily increasing billing).

When you put a hunger for more data alongside the aggressive growth of Chinese communications and technology companies thanks to an emerging middle class in the nation, it's easy to see why Morningstar has given CHU stock its vaunted five-star rating.

It's not alone, either. Both Macquarie and Credit Suisse upgraded the stock to Outperform (equivalent of Buy) in the last few months.

SEE ALSO: The 10 Best Chinese Stocks You Can Buy

Consolidated Communications

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Sector: Communications

Market value: $455.8 million

Dividend yield: N/A

One of the rare standout performers on Wall Street in an otherwise volatile 2020, Consolidated Communications (CNSL, $6.24) has delivered big gains lately for shareholders despite what seems to be a very sleepy and small-potatoes telecom operation with a scattering of about 1.7 million internet connections across metro and rural areas in more than 20 states.

The coronavirus pandemic put a premium on their broadband service, of course, creating a huge short-term lift. Furthermore, Consolidated Communications inked some noteworthy deals with local governments and school districts to win positive press - and the potential of a regular payday if these contracts persist.

CNSL is admittedly not coming up all roses. Shares plunged in April 2019 after the company eliminated its dividend in an effort to focus on paying down debt, and the stock hit record lows later in the year.

But its fates have vastly improved since then. Consolidated Communications has been able to win new business even as it restructures its balance sheet at the same time - and Wall Street has clearly taken notice, given the stock's snap-back from the March lows and its year-to-date returns of more than 60%.

SEE ALSO: Pros' Picks: The 15 Best Nasdaq Stocks You Can Buy

Dr. Reddy's Laboratories

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Sector: Healthcare

Market value: $8.9 billion

Dividend yield: N/A

With all the attention on biotechs and Big Pharma amid the pandemic, one name that never seems to come up for most U.S. investors is India-based drugmaker Dr. Reddy's Laboratories (RDY, $53.29). Unlike its Western counterparts, RDY is focused on generics and "active ingredients" used by personal product manufacturers as well as on proprietary treatments and research.

The margins are admittedly not as great on antibiotics or ingredients for over-the-counter remedies. But India remains a robust marketplace for modern medical products - and with about 1.4 billion residents, there are four times the "customers" than in the U.S., even if the per-capita spending on health care is much lower.

The general focus on health care spending is a good short-term tailwind, but this isn't just a quick trade. A strong balance sheet that includes $25 billion in cash and short-term investments over about $22 billion in long-term debt make Dr. Reddy one of the best stocks to buy if you want companies that are built to last.

SEE ALSO: 7 Growth Stocks to Buy for Oodles of Upside

Everbridge

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Sector: Information technology

Market value: $4.9 billion

Dividend yield: N/A

Everbridge (EVBG, $135.86) is a cloud-based data and communications company that specializes in emergency responses. Its specialized team knows how to protect networks and ensure resilience, and how to step in and handle things when a critical event happens.

Whether it's fighting malicious hackers holding key information for ransom or conducting proactive programs at a company that has sensitive client info it needs to protect, Everbridge has what it takes to respond to the unique threats to business continuity in a digital age.

With working from home on the rise thanks to coronavirus in 2020, it's natural to see an increase in cybersecurity issues. After all, folks in the office can depend on the IT department to update their virus protection software and to monitor the security of the network -- but a decentralized workforce means more ways that bad actors could try to find a way in.

These trends have resulted in an acceleration in sales, and analysts everywhere from SunTrust to Robert Baird to Stifel Nicolaus have labeled Everbridge a Buy or increased their price target in recent weeks. Needham & Co.'s Scott Berg raised his price target from $135 to $175 in late May, writing, "we understand EVBG shares look expensive. Our new valuation for EVBG assumes that the company is firing on all sales cylinders and has multiple opportunities that can drive significant upside to current expectations."

SEE ALSO: Hedge Funds' 25 Top Blue-Chip Stocks to Buy Now

Focus Financial Partners

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Sector: Financial

Market value: $2.1 billion

Dividend yield: N/A

Focus Financial Partners (FOCS, $30.03) is a smaller wealth management firm that partners with registered investment advisors all across America to provide hands-on services, primarily to high-net-worth individuals and families. Through this network, FOCS manages roughly $200 billion in client assets through more than 60 partner firms.

Wealth management is broadly getting chipped away as individuals fall in love with passive investing strategy and index funds. However, there remains a small but highly valuable customer base among the wealthy where they need true hands-on advice for estate planning, tax strategies and more sophisticated investments meant to deliver "alpha."

Focus caters specifically to this kind of investor through dedicated local partners who can provide a hands-on approach, and that's what merits it a spot on this list of best stocks off the beaten path. Oppenheimer recently raised its price target on FOCS and reiterated their Outperform rating. Meanwhile, BofA lifted the stock to Buy, with analysts crediting the upgrade to "a more favorable growth outlook and some improving financial metrics."

SEE ALSO: Small-Cap Value Stocks: This Time, Things Are Not Different

ManTech International

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Sector: Information technology

Market value: $2.8 billion

Dividend yield: 1.9%

ManTech International (MANT, $69.04) provides "mission-focused technology solutions" for the U.S. government, primarily the Department of Defense and intelligence community, as part of national security matters. This includes not only defensive cybersecurity measures to safeguard critical federal operations and sensitive data collection applications, but also the more mundane IT systems that are demanded by any 21st century operation.

Bank of America analysts recently zeroed in on ManTech as a tremendous opportunity in 2020 thanks to the coronavirus prompting more work-from-home applications for key government personnel - and greater need for this IT specialist as a result.

"Defense is defensive," BofA writes, so this stock should perform well even if the economic hits a rough patch.

And besides, MANT has a history of dominating thanks to "steady organic growth, strong cash flow, and high-barriers to entry," Bank of America's analysts continue.

NetEase

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Sector: Information technology

Market value: $53.3 billion

Dividend yield: 1.1%

NetEase (NTES, $409.30) is a video game studio that primarily serves the lucrative and fast-growing marketplace in China. In addition to highly successful in-house titles such as Fantasy Westward Journey, NTES also is the local partner of big Western studios like Activision Blizzard (ATVI) to service hits such as Overwatch that are more familiar to U.S. audiences.

The outlook for video game spending is always quite strong, as the sector always experiences year-over-year growth like clockwork. But the coronavirus pandemic has really accelerated spending among gamers in 2020.

Longer-term, investors are also quite bullish on NTES; Goldman Sachs recently upgraded the stock because of growth in its other education and music segments, creating a more diversified revenue stream, and maintained its Buy rating on expectations of "steady execution and good cash flows from its game biz."

All told, seven Buys versus just one Hold over the past three months puts NTES among some of the best stocks that don't make the average investor's radar.

SEE ALSO: 10 Things You Must Know About Becoming a Millionaire

Patterson Cos.

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Sector: Health care

Market value: $1.8 billion

Dividend yield: 5.5%

Based in Minnesota, Patterson Cos. (PDCO, $19.01) is one of the largest distributors of dental and veterinary equipment in the U.S. Its massive customer base is geographically diverse, but one thing each partner shares is a recession-proof business model where folks keep coming in to replace fillings or get their dogs checked for heartworm - no matter what's going on in the broader economy.

Bank of America and JPMorgan Chase both upgraded the stock a few months ago, and Guggenheim raised its price target to $28 a share - 48% higher than current levels. Recent chatter has been even more optimistic, as dental offices and vet clinics across the country are reopening with a with a strong backlog of appointments ready to boost business immediately.

All of this makes for quite the bull case. However, the icing on the cake is that Patterson offers a juicy 5%-plus dividend yield based on current prices.

Pool Corp.

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Sector: Consumer discretionary

Market value: $10.6 billion

Dividend yield: 0.9%

Even if you've never heard of Pool Corp. (POOL, $265.15), you probably still can guess what this company is peddling.

POOL distributes swimming pool chemicals, equipment and related leisure products. But despite being incredibly specialized, this stock is no small fry. It operates in North America, Europe, South America, and Australia and boasts a market capitalization on par with oil giant Halliburton (HAL) or investment broker E*Trade (ETFC).

Pool Corp. is among the best lesser-known stocks to buy, given the analyst community's rave reviews on it. POOL is among just a handful of stocks to earn the vaunted A+ rating from S&P Capital IQ. And research firm CFRA notes that beyond the obvious benefit of higher sales this summer as coronavirus squashes beach vacations and keeps more folks in their home pools, POOL is one of its favorite defensive plays.

Analysts credit its dominant market share of regular maintenance spending and "a strong balance sheet and liquidity position" to weather any downturn.

SEE ALSO: 15 Great Retirement Stocks to Buy at Reasonable Prices

Pure Storage

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Sector: Information technology

Market value: $4.6 billion

Dividend yield: N/A

Flash memory provider Pure Storage (PSTG, $17.31) is a vendor that has been slowly disrupting other tech stocks in the memory space. PSTG offers admittedly pricier solutions than traditional hard disk arrays, but better performance and reliability along with lower power consumption and smaller physical footprints for network hardware.

On top of that, the hardware is easier to upgrade and stays relevant longer - up to 10 years - which in the long run can save customers money.

Analysts at BofA recently reiterated their Buy rating on the stock thanks to strong performance and "gross margins holding out significantly above competitors." And longer-term, investments in a product line specifically designed to be deployed on artificial intelligence platforms has many on Wall Street eager to see what this very young company can do over the long haul.

United Natural Foods

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Sector: Consumer staples

Market value: $1.1 billion

Dividend yield: N/A

Organic products represent about 6% of U.S. food sales, but that small share of the typical shopping cart is still good for about $50 billion, and it's steadily growing.

United Natural Foods (UNFI, $16.65) might not be a household name - yet. But it's perhaps the best way for most investors to play that trend of rising organics sales as it is many grocery stores' go-to distributor for produce as well as natural personal care products and even processed and frozen foods.

With coronavirus creating more demand for store bought foods, UNFI put up a massive earnings "beat and raise" (better-than-expected earnings and an upgraded outlook) back in May. Shares have outpaced the market from the lows, 47% to 39%, albeit in a much more volatile manner.

SEE ALSO: 15 Best ESG Funds for Responsible Investors

Veoneer

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Sector: Industrials

Market value: $1.2 billion

Dividend yield: N/A

Sweden's Veoneer (VNE, $11.09) designs and manufactures automotive safety devices, including high-tech brakes and restraints. But more importantly, VNE is increasingly getting into advanced driver assistance systems and automated driving solutions with focus on autonomous driving.

With major automakers running hard towards self-driving cars, Veoneer is a key partner of many - and should benefit regardless of which specific company or model makes the biggest splash. That versatility makes it one of the best stocks to buy for an economic recovery.

VNE earns a top five-star rating from Morningstar analysts. In an in-depth report in April, the investment research firm predicted "average annual revenue growth for Veoneer of roughly 12% for the next 10 years" thanks both to industry-led demand as well as the likelihood that government safety regulations would make some forms of driver-assist technology mandatory like airbags and antilock brakes.

Werner Enterprises

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Sector: Industrials

Market value: $3.0 billion

Dividend yield: 0.8%

Werner Enterprises (WERN, $43.46) is one of the five largest freight carriers in the United States, with terminals and routes that weave across every part of the country. Even if many motorists never notice the name on the big rig beside them, Werner has likely been driving on a road near you recently as it actively operates in the 48 contiguous states and portions of Canada and Mexico.

While brick-and-mortar shopping trends have been disrupted in 2020 by coronavirus, the pandemic has also proven the power of logistics companies that power the e-commerce enterprises of the world. After all, if Werner wasn't picking up and dropping off its shipments at warehouses then that Amazon or UPS employee wouldn't have anything to package up and deliver to your front porch.

Strong fundamentals recently have also coincided with a big chance for an evolution at WERN as founder and executive chairman Clarence Werner stepped down at the end of May. The 83-year-old executive, who started the company with one truck back in 1956, surely saw success in his career. But he might not exactly be the leader shareholders were looking for in a modern era with complicated supply chains and talk of self -driving fleets.

Analysts see a lot of hope for continued growth and evolution at WERN, with increased price targets since April from a host of investment banks including Citigroup, Credit Suisse, Morgan Stanley and others.

SEE ALSO: The Best AI Stocks to Buy for 2021 and Beyond

Woodward

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Sector: Industrials

Market value: $4.9 billion

Dividend yield: 0.4%

Woodward (WWD, $79.44) designs and manufactures "control solutions" that include fuel pumps, air valves, meters, motors and all manner of other gadgets.

But the real money-maker is its aerospace industry ties as it makes thrusters for turbine engines, flight deck controls and even systems for guided weapons. This built-in baseline of military spending helps to provide stability in tough times, and its industrial connections allow it to scale up and grow as demand warrants.

Barclays just upgraded its rating on Woodward to Overweight on June 1, and it's not hard to see why: WWD stock flopped big time in February as the coronavirus pandemic sapped sales. But management quickly scuttled plans to purchase privately held rival Hexel - preserving cash, avoiding headaches and quickly restoring confidence.

When the stock topped earnings forecasts in May and simultaneously announced that it would reduce compensation 25% for its CEO and independent directors, Wall Street woke up and began buying shares in earnest, with scant sign of momentum slowing down. It could continue to be one of the best stocks to buy going forward, too, given that it has plenty more ground to cover before it reclaims earlier-year levels.

Workiva

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Sector: Information technology

Market value: $2.3 billion

Dividend yield: N/A

Most investors wouldn't think to look for a cloud computing leader in Ames, Iowa. But that's where you'll find the headquarters of Workiva (WK, $49.60), a reporting and compliance platform that offers companies ways to manage processes and data in the cloud to better collaborate - wherever they are in the world.

Needless to say, Workiva's business model is tailor-made for 2020, as the coronavirus pandemic has disrupted the traditional office environment. However, most industries are openly discussing the likelihood that this year's surge in telecommuting will stick for the long haul and continue to benefit companies like Workiva.

You might say that cloud-based enterprise software firms are a dime a dozen. You'd be right. But the digital toolkit of Workiva's Wdesk software is unique in that it is specifically designed for governance, risk management and compliance - sensitive financial areas that demand accountability and security, and aren't easily managed in something like Google Docs.

Bank of America recently rated WK a Buy, and their analysis says it all: "While in a niche market, we think Workiva is a best-of-breed regulatory reporting application with growth opportunities as it replaces antiquated, manual processes."

SEE ALSO: 25 Stocks That Billionaires Are Selling

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