Stocks are entering a tough period. Top small-cap strategist says buy these steady quality names
Bond yields have trended higher as of late, threatening to put pressure on the equities market.
However, there are several small-cap stocks that are poised to weather the impending storm, according to Jefferies. The investment firm published Monday a list of its strongest small and mid-cap stock ideas.
Its top picks included Citizens Financial Group , Okta and McCormick & Company . "Over a longer period, higher [rates] for longer has been good for small, value, and cyclicals," small and mid-cap strategist Steven DeSanctis said Monday in a note to clients.
He added that while higher-for-longer rates haven't been as helpful for small caps since 2002, balance sheets are in better position today than they were int he past. "The rates market will play a much larger role in what does and does not work going forward," DeSanctis added.
Over the past few months, yields on government bonds have jumped dramatically as U.S. economic data has weakened and geopolitical uncertainties, including the Iran War, have persisted. In addition, the U.S. national debt also crossed $40 trillion for the first time this month, doubling from its level in 2016 and fueling inflation fears.
Jefferies screened for buy-rated names that have relatively low beta — meaning they are less volatile relative to the market — and are cheap to identify various stocks to ride out difficult markets. Here are some of the stocks most liked by Jefferies. McCormick & Company The manufacturer of Old Bay seasoning is likely to gain ground on its exposure to faster-growing consumer groups, according to Jefferies.
"MKC is one of the better positioned names in the Food sector longer-term given more exposure relative to peers to faster growth categories, Emerging Markets, and foodservice / industrial channels that help cushion softness in the U.S. Retail market," analyst Scott Marks said in a note to clients. The analyst has a buy rating on the stock.
He also has a $62 price target on shares, which is nearly 14% above their Thursday closing price. Shares of McCormick have traded down roughly 20% year to date as investors remain cautious of the company's proposed multibillion-dollar merger with Unilever's food vertical announced in early 2026 . However, the deal could ultimately drive further upside to shares of the seasoning maker.
"We believe rationale for the Unilever deal makes sense long-term, giving MKC incremental exposure to Emerging Markets and stronger away-from-home positioning to capture both back-of-house and front-of-house placements," Marks wrote. Okta The identity-based security platform is a good addition to investors' portfolios due to sky-high demand for its services, per Jefferies.
"We like OKTA given…visibly healthy demand as identity remains at the top of [chief information security officers'] priority lists (supported by survey work)," analyst Joseph Gallo said in a note. Okta has about doubled the value of its shares in 2026. Its gains come as growing artificial intelligence adoption has prompted executives to invest more into their organizations' cybersecurity initiatives.
"Underlying strength in OKTA's business evidenced by recent reacceleration in [net revenue retention] to 107%, while pipeline visibility and recent [go-to-market] changes (improved channel strength & rep productivity) support a 'year of harvesting,'" Gallo wrote in his note. Citizens Financial Group Citizens Financial Group has considerable room to run, according to Jefferies.
"We continue to like Citizens Financial Group (CFG) given its above-peer earnings growth, improving profitability, and a valuation that still leaves room to run," analyst David Chiaverini said in a note to clients.
"Several initiatives should continue to drive that growth, including sustained net interest margin expansion, record momentum in capital markets and wealth management, ongoing Private Bank buildout, and efficiency gains from the company's 'Reimagine the Bank' program." Jefferies has a buy rating on Citizens. It also has a $90 price target on shares, implying 28% upside from Thursday's close.
Shares are up roughly 20% in 2026.