Citi Research Sees Safety In Small Caps

The typical “flight to safety” investments have been strong performers since the Brexit vote caught the world off guard last week. The iShares Barclays 20+ Yr Treas.Bond (ETF) TLT is up 5.5 percent, and the SPDR Gold Trust (ETF) GLD is up 4.4 percent, while the SPDR S&P 500 ETF Trust SPY has plummeted 4.2 percent.

Citi analyst Scott Chronert believes he has identified a post-Brexit safe haven stock play that is far from typical: small caps. According to Chronert, Citi is predicting a correlation to develop between the U.S. dollar and small cap stocks. Despite the Brexit fallout, the firm maintains its 1200 year-end price target for the Russell 2000.

“Considering the 2012 circumstance, we expect a stronger finish to the year as related uncertainties are alleviated and/or discounted post the November elections,” Chroner explained.

Related Link: Here's How The Brexit Could Impact The U.S. Housing Market

In addition to seeing nearly 10 percent upside for the Russell 200 by the end of the year, Citi also ran a value screen for Buy-rated services stocks under $6 billion in market cap and identified GrubHub Inc GRUB, Proofpoint Inc PFPT, The Rubicon Project Inc RUBI and Science Applications International Corp SAIC as top names for traders to consider buying on the Brexit dip.

Since last week’s vote, the iShares Russell 200 Index (ETF) NYSE: IWM) is down 5.8 percent.

Disclosure: The author holds no position in the stocks mentioned.