Jefferies names its favourite US mid-cap stocks for second half of 2025

Jefferies is bullish on US mid-cap stocks for the second half of 2025, anticipating a weaker dollar will benefit domestic companies; their top picks are Lamb Weston (LW) and Stag Industrial (STAG). Jefferies cites Lamb Weston's strong quarterly performance, reaffirmed full-year guidance, strategic advisor for value creation, a 2.77% dividend yield, and ability to pass on costs as reasons for their $75 price target, implying a 40% upside. For Stag Industrial, Jefferies points to strong leasing spreads, onshoring trends benefiting single-tenant industrial properties, a diversified portfolio, and a 4.20% dividend yield, setting a $45 price target that indicates a 30% potential gain.

Analysis

Jefferies anticipates a favorable environment for US mid-cap stocks in the second half of 2025, driven by an expected weakening of the US dollar, despite recent outperformance by international equities as evidenced by the iShares MSCI All Country World Index ex U.S. ETF (ACWX) gaining over 14% year-to-date compared to the S&P 500's 0.61% return. The investment firm specifically highlights Lamb Weston Holdings Inc. (LW) and Stag Industrial Inc. (STAG) as promising opportunities. For Lamb Weston, Jefferies' bullish outlook is supported by its recent strong quarterly performance, where it surpassed Street estimates, and a reaffirmation of its full-year guidance. The engagement of a strategic advisor to explore value creation and operational cost savings, coupled with a 2.77% dividend yield and confidence in its ability to pass on higher costs while maintaining margins through international expansion and automation, underpins a $75 price target, suggesting a potential upside of over 40%. This positive view is shared by other Wall Street experts, with a consensus 'overweight' rating on LW. Similarly, Stag Industrial reported a strong quarter with upbeat future guidance, driven by a significant 27% increase in cash-leasing spreads. Jefferies sees continued momentum from onshoring production and supply chain reconfigurations benefiting STAG's portfolio of single-tenant industrial properties. The REIT's diversified portfolio, disciplined capital allocation, and focus on high-quality asset acquisition contribute to stable cash flow, making its 4.20% dividend yield attractive. Jefferies has set a $45 price target for STAG, indicating a potential 30% gain.

Key Decisions for Investors

• Investors considering US mid-cap exposure for H2 2025 may find Lamb Weston (LW) attractive due to its strong fundamentals, potential 40% upside projected by Jefferies, and a 2.77% dividend yield, particularly if anticipating margin resilience and value creation from strategic initiatives.
• Stag Industrial (STAG) warrants attention for income-focused investors, given its 4.20% dividend yield and Jefferies' projected 30% upside, supported by robust leasing spreads and favorable secular trends in industrial real estate such as onshoring and logistics efficiency.
• Monitor LW's progress with its strategic advisor and STAG's ability to sustain leasing spread growth and capitalize on supply chain reconfiguration trends as key performance indicators for these Jefferies recommendations.