Goldman says small caps to beat large caps this year. 10 cheap smaller stocks to buy

Small cap stocks could finally break out above their large cap peers in 2024, according to Goldman Sachs portfolio strategists. "The combination of low current valuations and a healthy economic outlook indicates that the Russell 2000 small cap index should return roughly 9% in the next 6 months and 15% in the next 12 months," Goldman Sachs analyst Ben Snider wrote in a Monday note.

That 15% forecast tops the 7% expected gain for the large cap S & P 500 that Goldman sees by the end of the year, or 9% when including dividends. Small caps lagged large caps by a wide margin in 2023, with the Russell 2000 climbing about 15% compared to a 24% gain for the S & P 500. The outperformance of large caps last year compared to their small cap cousins was largely due to the meteoric rise of the so called Magnificent Seven stocks, including AI chipmaker Nvidia and iPhone maker Apple .

Snider ties the optimistic outlook for small cap stocks to Goldman's macroeconomic outlook for the coming year, which anticipates 2% growth in U.S. gross domestic product. Historically, "nearly two thirds of the variation in Russell 2000 12 month returns has been explained by valuations at the start of each period and real U.S.

economic growth during the period," Snider added. The forecast 15% return for the Russell 2000 this year also matches the index's historical median return of 16% during presidential election years going back to 1984, Goldman argued. The Wall Street investment bank screened for stocks that are currently trading below their five year median price to earnings multiple, and five year median price to book multiple.

Here's a look at some of the stocks that made the Goldman list. Broadcast and digital media company TEGNA made Goldman's cut. The owner of 64 stations is ahead a little than 1% so far in 2024 after plunging almost 28% in 2023. TEGNA's forward 12 month P/E ratio of 4 and trailing 12 month P/B multiple of 1.0% are both far below the past five years' track record.

TGNA 1Y mountain TEGNA stock. TEGNA last week renewed its affiliate agreement with NBC , extending an agreement in 20 markets covering about about 17% of total U.S. households. Asset manager Wisdom Tree also made Goldman's screen. Shares are virtually unchanged in 2024 after rallying 27% last year.

WT 1Y mountain Wisdom Tree stock. Northcoast Research upgraded the financial services stock to buy from neutral at the end of December, according to a Street Account report. The firm's $9 per share price target implied more than 31% upside ahead. Other names that made the Goldman small caps list include Ziff Davis and Array Technologies .

CNBC's Michael Bloom contributed reporting. Disclosure: Comcast owns NBCUniversal, the parent company of CNBC..