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By most measures stocks have had a good year in 2021, even though the pace of the market's gains has slowed compared to their frantic pace in late 2020.

But there is always room for improvement, and Jefferies says its analysts are offering one path forward with their Franchise Picks list of best ideas.

"As of 5/31/21, the Franchise Picks list has outperformed the SPX by ~400 bps on a total return basis," the firm wrote in a note to clients. The S&P 500 posted a total return of 9.5% over the first five months of the year, so that implies a total return of about 13.5% for the Jefferies stocks. 

The list is spread out across the market, and includes companies whose prospects are linked to the economic recovery as well as those that Jefferies simply considers undervalued. There are three additions to the list in June: industrial firm Parker Hannifin, implantable contact lens maker Staar Surgical, and video game publisher Take-Two.

It removed blood and plasma services company Haemonetics, used car retailer CarMax, and consumer products maker Procter & Gamble from the list.

In total, Jefferies expects double-digit gains for 20 of the 24 stocks on the list. Those stocks are ranked from lowest to highest based on the gains implied by the analysts' price targets, which shows the upside Jefferies analysts believe they have. Percentages were calculated based on Thursday's closing prices.

Ticker: STAA

Sector: Healthcare

Thesis: "Current valuation continues to assign relatively limited potential for the EVO Visian ICL (myopia lens) and Viva (presbyopia) implantable lens solutions to gain share. … Despite the near peak valuation, we still see significant upside for STAA shares on modest penetration assumptions." — Anthony Petrone

Price target: $150

Upside to target: 4.0%

Source: Jefferies

Ticker: TDG

Sector: Industrials

Thesis: "TDG is ~57% exposed to narrowbody platforms, which supports a quicker recovery in both AM and OE volumes as the global air traffic market shifts away from longer haul international travel in favor of domestic flights. … Any recovery in air travel or improvement in sentiment would help drive the commercial Aerospace business." — Sheila Kahyaoglu

Price target: $710

Upside to target: 7.7%

Source: Jefferies

Ticker: EXR

Sector: Real estate

Thesis: "The Self-Storage sector will continue to deliver the strongest FFO/sh growth among REITs in 2021, driven by an ongoing surge in demand which has driven unprecedented pricing power and all-time high occupancies. We particularly like Extra Space Storage because the company has one of the strongest revenue management strategies." — Jonathan Petersen

Price target: $173

Upside to target: 8.6%

Source: Jefferies

Ticker: BX

Sector: Financials

Thesis: "BX has been steadily building out longer-duration permanent capital vehicles such as BREIT, BCRED, and Infrastructure as well as quietly establishing a ~$100B balance sheet light insurance offering. In aggregate, this all works to increasingly add earnings stability and higher multiple fee-paying AUM." — Gerald O'Hara

Price target: $102

Upside to target: 8.9%

Source: Jefferies

Ticker: CVS

Sector: Healthcare

Thesis: "We expect earnings outperformance to continue, especially as we see further recovery in both healthcare utilization trends (benefiting the pharmacy and PBM) and retail pharmacy traffic. … We believe investors still don't appreciate the longer-term growth and earnings boost that CVS should see from its differentiated, healthcare-focused strategy." — Brian Tanquilut

Price target: $95

Upside to target: 11.1%

Source: Jefferies

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